Through the COVID-19 pandemic and social distancing rules, we have seen a renewed focus to adopt electronic execution (such as electronically pasting signatures into contracts, use of touch screens to electronically sign or use of electronic platforms like DocuSign). Electronic measures are a valuable solution in a time where physically signing documents or moving them between parties is difficult and time consuming.
While there is no real distinction between 'ink' and 'electronic' signatures under Australian law, there are a few key issues that need to be considered to ensure that documents are still valid.
Deeds cannot be executed electronically
There is wide commentary that deeds can only be executed on paper, except in New South Wales where this has been changed by legislation.
Until this is resolved in each jurisdiction by legislation or Court decision, there is a risk that deeds signed electronically are not enforceable as a deed. Although this can usually be addressed by converting the document to an agreement, this is not always possible and doesn't provide the benefits of using a deed. These risks need to be considered when adopting this solution.
In the current environment, there is a call for legislative reform and discussion to change this approach. In response to the COVID-19 pandemic, the Victorian Government has introduced temporary measures to allow the electronic execution of deeds. However, these measures will expire on 24 October 2020.
Another key requirement for the valid execution of deeds is for a witness to attest to the execution.
Common seals cannot be electronic
A common seal cannot be affixed electronically. A physical signature method must be used for documents that require the affixing of a common seal.
Witnesses must be physically present
If a witness is required (such as where an individual signs a deed, either personally or under a power of attorney), then the witness must be physically present when the document is signed and must witness the same document.
In most states, there are limited circumstances where a document could be effectively witnessed electronically, as it requires the witness and signatory to be in each other's physical presence and electronically sign the same document.
New South Wales and Victoria have both enacted a temporary regulations to reduce the need for face-to-face contact during the COVID-19 pandemic. These regulations are currently valid until 22 and 24 October 2020 respectively. Under the new regulations, a witness can validly witness a person signing the document in real time using video conferencing technology. The witness can sign a copy of the document to confirm that they witnessed the signature.
If witnessing is required and is ineffective, then the document may not be enforceable. Organisations need to be careful to properly implement what is required, and not to take 'digital shortcuts' – even though this process might be more cumbersome than normal.
Split execution
There is uncertainty whether documents to be signed by two persons under section 127 of the Corporations Act 2001 (Cth) or by two attorneys under a power of attorney, can be signed electronically.
A recent Court decision held that where a party must sign by two persons, if those persons each sign a separate document (although on identical terms), then neither document has been properly executed, as neither document has been signed by both persons.
This has cast into doubt the effectiveness of electronic execution by corporations under section 127 and joint attorneys.
However, in response to COVID-19, there is now a Commonwealth regulation in effect until 6 November 2020, which allows corporations to electronically sign documents under section 127 of the Corporations Act. This regulation also permits officers to sign by split execution.
Considerations for the real estate sector
Where documents need to be registered with an authority (such as a Land Titles Office), electronic execution is often not accepted.
While registries are moving towards electronic signing and lodgement, progress has been slow and in many cases electronically signed documents are not acceptable for lodgement.
There are some 'work arounds' and options to the mitigate risks of these issues – business can continue - but despite this challenging environment it's important to take an approach where you and your organisation are confident with the outcome.
Considerations for the higher education sector
The higher education sector is no stranger to the adoption of tools for electronic signatures and the certification of documents. Many institutions issue certified academic transcripts to students through platforms such as My eQuals, and already electronically sign documents using platforms such as DocuSign. It is, however, important to be aware of the limitations of electronic signature methods, to ensure that contracts are enforceable.
For instance, there are some documents that can only be executed by affixing a common seal under specific university legislation or policies. As discussed above, a common seal cannot be affixed electronically, and a physical signature method must be used for such documents.
How we can help
We have a core team that has been advising on appropriate execution methods. Please contact us to discuss options for electronic execution and what might work best in your circumstances.
