The use of electronic signatures in a remote working Australia

The use of electronic signatures in a remote working Australia

The use of electronic signatures in a remote working Australia

This article reflects the state of the law in Australia as at 6 May 2020. Since this time, in response to COVID-19, various Australian states and territories have passed legislation temporarily allowing certain documents to be signed and witnessed electronically. We outline the new laws in Victoria as at 19 May 2020 here (this article also touches on the position in other states and territories) and comment specifically on the New South Wales “remote witnessing” measures here.

With many Australian and international businesses shifting to remote working arrangements in light of the government’s COVID-19 response, companies and individuals are likely to need to sign documents without easy access to hard copies or a printer.

The good news is that, generally, under Australian law, an electronic signature is likely to be treated the same as a written signature, provided that certain requirements are met. The bad news is that these requirements are not always clear and that some documents are exempt from the legislation governing electronic signatures.

This article sets out the general position under Australian law on the use of electronic signatures (including suggestions on how the requirements may be met to provide a greater level of certainty regarding the validity of electronic signatures) and also covers some important exceptions to the general rule.

1. The general position is that documents can be signed electronically

The use of electronic signatures in Australian is governed by the Electronic Transactions Act 1999 (Cth) and corresponding legislation for each State and Territory (ETAs).[1]

The general position is that provided the requirements of the ETAs are satisfied, agreements can be executed electronically and there are low risks of the Courts holding that agreements are invalid or unenforceable for the reason that they were executed in that way.

Generally, the ETAs provide that an electronic signature will have the same effect as a written signature provided that three requirements are met:

(a) Identity: The method of signing must identify the person signing and their consent to the content of the document. This will ordinarily be satisfied by the use of an electronic signature accompanied by typed text setting out the signatory’s name and position (if appropriate).[2]

(b) Reliability: The method of signing must be as reliable as appropriate for the purpose of the document, in light of all the circumstances. This may be demonstrated, for example, by using software which requires user authentication (such as a password) before it will insert a digital signature, and/or through the use of digital certificates, which set out metadata regarding the time and place a signature was inserted.[3]

(c) Consent: If the “receiving entity” (i.e., the entity to which the document will be provided) is a Commonwealth body, any technical requirements imposed by it regarding the signature must have been met. If the “receiving entity” is not a Commonwealth body, it must have consented to the method of signing. Where the document in question is an agreement, a clause in the agreement could provide that the parties agree that the document can be executed using electronic signatures and identify the relevant service which the parties agree to use for that purpose.[4]

The ETAs do not displace the common law on electronic signatures, but are intended to prove certainty and clarity. Therefore, even if these requirements are not satisfied, a court may find that an electronic signature is nevertheless effective at indicating the signatory’s consent to the signed document, particularly given that courts have recognised that electronic signatures are “a fact of modern commercial life”[5].

However, best practice is to comply with the requirements set out in the ETA, as this provides greater certainty if an electronic signature is challenged.

Additionally, agreements should include an express clause providing that the parties agree that the agreement can be executed electronically and identifying the service which the parties agree to use for that purpose.

2. The government has passed temporary laws regarding documents executed by corporations

Section 127 of the Corporations Act 2001 (Cth) (Corporations Act), which specifies the means by which a corporation may execute a document without using a common seal, is usually exempt from the ETAs.[6] As mentioned above, a document signed electronically on behalf of a corporation may still be validly executed under common law.[7] However, the prevailing view is that other persons are not entitled to rely upon the assumptions under section 129 of the Corporations Act (including an assumption that the document was validly executed) in relation to a document which has been signed electronically. Therefore, in ordinary circumstances, any person dealing with a document which purports to be signed electronically on behalf of a corporation should make further inquiries as to the validity of the execution, including identifying the name and position of the signatory or signatories.

However, this default position has temporarily been modified as a result of the Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 (Cth). This determination provides that a company can execute a document without using a common seal if the signatories sign electronic counterparts of the document (provided that each counterpart contains the entire contents of the document) in accordance with the ETA. The normal requirements of the ETA, as set out above, must still be satisfied. The determination also provides that other persons are entitled to rely upon the assumptions under section 129 of the Corporations Act (including an assumption that the document was validly executed) in relation to documents which have been signed electronically in accordance with the ETA. The determination came into effect on 5 May 2020 and is automatically repealed after 6 months.

3. Electronic execution may not be appropriate in certain circumstances in respect of documents that need to be witnessed (including deeds)

Four states (NSW[8], Queensland[9], SA[10] and WA[11]) have ETAs which specifically do not apply to the signatures of witnesses.[12] The ETAs in the other states and territories and the Commonwealth ETA (which applies to transactions and documents made under Commonwealth laws, such as most IP documents) do not refer to witnessing requirements. This does not necessarily mean that electronic signatures cannot be witnessed electronically in these four States; rather it means that the common law position will apply in those circumstances without the added certainty of the legislation.

The common law is relatively untested in this regard. If the ETAs do not apply, it is possible that a court would accept a document which is signed and witnessed electronically, provided that the witness was physically present when the signatory inserted their signature.

It should also be borne in mind that at common law there is a traditional formation requirement that a deed must be printed on paper, parchment or vellum. While this requirement has been described as “antiquated” by the courts, and may not be enforced in all contexts, it is safest to comply with it whenever possible.

If this requirement is enforced by the courts and not complied with by the parties to a deed, it does not necessarily mean that the parties’ rights and obligations set out in the deed will be unenforceable. The effect of failing to comply with the requirement would rather be that the agreement would not take the form of a deed. It may still be enforceable as an agreement provided the requirements for an enforceable agreement have been met, including the requirement of consideration.

Therefore, given the added evidentiary burden in proving that a deed was validly executed, the specific exclusion of witnessing requirements from certain ETAs, the untested common law position, and the traditional formation requirements for a deed, any enforceability risks can be avoided by signing and witnessing deeds in person using wet ink. This may not be necessary if the deed is for a Commonwealth body whose general practice is to accept documents which are signed electronically, in which case an electronic signature, for practical purposes, is likely to be sufficient.

4. Other documents may also be exempt

Documents required under other legislation, or documents required by government bodies such as ASIC, may also be exempt from operation of the ETAs. The exemptions involving Commonwealth legislation are contained in Schedule 1 to the Electronic Transactions Regulations 2000.[13]  Therefore, signatories and practitioners should ensure that any requirements specified by the receiving entity are complied with, and ensure that the governing legislation is not exempt from the ETAs and does not impose specific restrictions regarding the use of electronic signatures

5. The Federal Court has issued a practice note regarding electronic signatures

Of particular interest to practitioners, the Federal Court released the Special Measures in Response to COVID-19 (SMIN-1) practice note on 23 March 2020. The notice provides that the Court will temporarily allow all documents which need to be filed with the Court (including affidavits) to be signed electronically, including by having the signatory type their name in the relevant space in the signature block (notwithstanding that this may not necessarily comply with the requirements of the ETA). The Court will also accept unsworn affidavits on the understanding that these affidavits will later be sworn or affirmed when circumstances allow. This notice remains in effect until suspended or revoked.

[1] Electronic Transactions (Victoria) Act 2000 (Vic), Electronic Transactions Act 2000 (NSW), Electronic Transactions Act 2001 (ACT),  Electronic Transactions (Northern Territory) Act 2000 (NT), Electronic Transactions (Queensland) Act 2001 (Qld), Electronic Transactions Act 2000 (Tas), Electronic Transactions Act 2000 (SA), Electronic Transactions Act 2003 (WA)

[2] Electronic Transactions Act 1999 (Cth) s 10(1)(a)

[3] Electronic Transactions Act 1999 (Cth) s 10(1)(b)

[4] Electronic Transactions Act 1999 (Cth) s 10(1)(d)

[5] Stuart v Hishon [2013] NSWSC 766 at [34] per Harrison J

[6] See Electronic Transactions Regulations 2000, Schedule 1, for a list of exemptions.

[7] See, e.g., R v Moore; Ex parte Myers [1884] 10 VLR 322 for a discussion of fundamental common law requirements; see, e.g., eBay International AG v Creative Festival Entertainment Pty Ltd (2006) 170 FCR 450 on the application of common law principles to electronic signatures

[8] NSW Regulations, Reg 5(f)

[9] Qld Act, Schedule 1, Item 6

[10] SA Regulations, Reg 5(1)(a)

[11] WA Regulations, Reg 3(1)(a)

[12] Note that in Victoria, unlike other jurisdictions, it is not a requirement for deeds to be witnessed.

[13] Similar exemptions appear, or are provided for, in the State and Territory legislation: Vic Regs 6, 7; NSW Reg 5; ACT Act s 6A; NT Regs 2, 3, 4; Qld Act Schedule 1; Tas Regs 4, 5; SA Reg 5; WA Reg 3

The article was originally published on Thursday, 26 March 2020. The content was last updated on Monday, 11 May 2020. 

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