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12/02/2015 | Stephen Harvey eCommerce, digital,

Your Signature Counts

Electronic signatures - why take the risk?
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With e-commerce and digital business exploding, moves have been made to open the door to the use of electronic signatures on legal documents, like trust deeds. At present, however, the reality of fully electronic execution is a long way from the ideal.

Is e-commerce legislation keeping up with our relentless drive towards digital efficiency? In one word – no. Are the services offered by a number of automated systems foolproof? No.

A standard handwritten signature on a hard copy trust deed remains the proper method for signing.

The marketplace is opaque

We’ve made no secret of the fact that Acis will be among the first to embrace electronic signatures once the system is working. The problem lies in the opaque market for existing services. We believe this is driven by international providers that are failing to deliver the clarity that clients need to ensure structures are correctly established and legally binding.

Whilst a number of operators have entered the Australian market offering electronic signature systems, we have been unable to obtain clarification from them regarding the potential exposure for our clients. Until we receive detailed responses to our queries, our advice to you is to avoid the risk until the legal environment is clear.

The legislation is lagging

As in many other areas of the digital economy, Australian federal, state and territory legislation is lagging with regard to the usage of electronic signatures. All are essentially similar in that they state a document is not invalid merely because it is signed electronically. Not only is this a long way from validation, each law contains hurdles which need to be cleared in order to ensure a signature is binding.

In each case, the legislation applies to all laws or transactions, unless excluded.

Assuming that you can comply with the conditions established under relevant legislation, each law contains further exclusions – specific legislation and/or transactions that are not subject to the protections of the electronic communications laws. Where specific legislation and/or transactions are excluded, electronic signatures cannot be used.

When dealing with trusts and SMSFs, the Corporations Act 2001 provides a method for the execution of documents by companies, whilst state/territory legislation applies for the execution of deeds by individuals.

To complicate matters further, any person to whom a trust deed is submitted, for a particular transaction, would need to approve and consent to the electronic signature. We’d be surprised if any bank in Australia would yet accept such a method.

So, at least for the time being, we appear not yet to have entered the 21st century for the purposes of signing documents like trust deeds. Why take the risk? We say, stick to handwritten signatures.

For any queries regarding electronic signatures, please contact Stephen Harvey toll-free on 1800 773 477.

 

Legislation Governing Electronic Signatures 

Commonwealth Legislation
Commonwealth legislation imposes the following conditions on electronic signatures:

  • a method is used to identify the person and to indicate the person’s intention;
    and    
  • the method used is either:
  • as reliable as appropriate for the relevant purpose, in the light of all
    the circumstances; or
  • proven to have fulfilled those functions; and
  • the person to whom the signature is given consents to that requirement being
    met by electronic communication.

Legislation Governing SMSFs and Trusts

  • The Corporations Act 2001 provides a method for the execution of documents (including trust deeds) by companies – section 127 (the primary method relied upon) requires signature by company officers. The Commonwealth Electronic Transactions Act 1999; however, excludes the whole of the Corporations Act from its operation. Therefore, electronic signatures do not constitute “signing” under the Corporations Act (at least as far as section 127 is concerned).
  • In each state/territory, legislation applies which deals with the execution of deeds by individuals (for example, the Queensland Property Law Act 1974). Usually these require an individual’s signature to be witnessed by an independent third party. In Queensland, the Electronic Transactions Act (Qld) doesn’t exclude the execution of deeds. Therefore at first glance, signing a trust deed using an electronic signature appears possible; however, the Act does not extend to witnessing, so an electronic signature must be witnessed by the written signature of the witnessing party – meaning the electronic signature could not work, in practice, for trust deeds.