eConveyancing and authority to sign

14 Mar 2017

This is a summary of a paper written with Claire Martin, solicitor.

eConveyancing is start to finish online conveyancing in which contracts are created and exchanged, and funds transferred and documents lodged for registration, entirely electronically. eConveyancing is the product of online platforms, such as Infotracksupported by DocuSign creating electronic contracts capable of being digitally signed and exchanged, and Property Exchange Network Australia, (“PEXA”), permitting the electronic transfer of funds and the electronic lodgement of settlement documents in land titles registries.

The Model Law on Electronic Commerce - providing that an electronic information will not be invalid solely on account of it being wholly or partly in electronic form - the Australian Electronic Transactions Acts[1] and the general law, all support the validity of electronic writing and signatures in telegrams,[2] mailgrams,[3] faxes,[4] and emails [5] for dealings in real property.

In 2011, the Council of Australian Governments made the Electronic Conveyancing National Law (ECNL), adopted by each state and the Northern Territory in 2012 and 2013, and the Australian Registrars National Electronic Conveyancing Council (ARNECC) to enable, oversee and ensure compliance with an electronic conveyancing regulatory scheme. The object of the ECNL is to enable documents in electronic form to be lodged and processed by the land titles offices of each participating jurisdiction without derogating from the fundamental principles of the Torrens system of land title. The ECNL provides for the creation of an Electronic Lodgement Network (ELN), enabling the preparation of instruments in electronic form for electronic lodgement and processing by land titles offices, for Registrars General to operate an ELN or approve another person to be an Electronic Lodgement Network Operator (ELNO), and for Registrars General to make operating and participation rules for ELNOs and subscribers to an ELN. Effectively, the rules in each jurisdiction reflect the Model Operating Rules (MOR) and Model Participation Rules (MPR) promulgated by ARNECC.

In conformity with the ECNL, the Law Society of New South Wales has published an updated version of the Contract for Sale and Purchase of Land, known as the Electronic Contract of Sale (eCOS) including a new clause 30 regulating electronic settlement. Although it is not possible to electronically sign the eCOS in the format provided by the Law Society, Infotrack supported by DocuSign has released SignIT, an eContract for the sale of land that can be electronically signed and exchanged.

A law practice contemplating an eConveyance settlement for a client must register online with an ELN, currently PEXA, and appoint solicitors authorised to digitally sign registry instruments and the financial settlement statement. Each solicitor must have his or her identity verified before being provided with a digital certificate to execute documents on the client’s behalf. The client must provide written authorisation for the certified solicitor to act, in the form prescribed in schedule 4 of the MPR, and r 6.5 of the New South Wales MPR now requires the solicitor to take “reasonable steps” to verify the identity of the client. Reasonable steps include following the procedure set out at schedule 8 of the MPR.

If a vendor’s solicitor has created a digitally signable contract using Infotracksupported by DocuSign, a purchaser or solicitor acting for the purchaser may be provided with an electronic link enabling eSigning by the purchaser. On eSigning by both parties, the vendor’s solicitor is prompted to click on an “exchange” icon in DocuSign and the eContract is electronically dated and emailed to all transacting parties. On exchange, Infotrack will pre-populate PEXA with the details necessary to create the documents required for settlement, and will set a time for automatic electronic settlement. On settlement three things happen simultaneously: a dealing number giving priority is created; documents are lodged in the land titles office; and settlement funds are electronically distributed to pre-designated accounts. eRegistration occurs sometime after the documents have been lodged.

eConveyancing is quick, transparent and cheap. However, digital signatures, although almost impossible to forge, are only as reliable as the persons entrusted with the IDs, passwords and hardware needed to make them. In Hugger Mugger LLC v Netsuite Inc,[6] an IT manager without actual authority was found to have had ostensible authority to bind the plaintiff because he possessed the user ID and password necessary to sign. In AET Inc Ltd v C5 Communications LLC,[7] the plaintiff denied an electronic signature on the basis of fraud. It was common ground that an authorised employee of the plaintiff had sent another employee her electronic signature and the other employee had put her electronic signature into the agreement. In the circumstances, the employee’s email could have been evidence of authority to sign, or evidence of the other employee fraudulently using the signature to sign the agreement. Most recently, in Williams Group Australia Pty Ltd v Crocker,[8]the respondent was issued an ID and password to make a remote electronic signature and did not change the password. The judge at first instance accepted that anyone with knowledge of the ID and password could have made an electronic signature as if it was the respondent’s, and that this is what had happened in respect of a credit application and guarantee given without the respondent’s authority or knowledge. The Court of Appeal of New South Wales held that the respondent’s use of remote digital signature technology did not amount to a representation sufficient to support the appellant’s claim of ostensible authority, nor did the respondent’s failure to change his password amount to such a representation. Nevertheless, the question of authority to sign is increasingly likely to arise in contested eConveyancing transactions.

[1][1] Electronic Transactions Act 1999 (Cth); Electronic Transactions Act 2001(ACT); Electronic Transactions Act 2000 (NSW); Electronic Transactions (NT) Act 2000; Electronic Transactions (Qld) Act 2001; Electronic Transactions Act 2000 (SA); Electronic Transactions Act 2000 (Tas); Electronic Transactions Act 2000 (Vic); Electronic Transactions Act 2003 (WA). The signature provisions were considered in Get Up Ltd v Electoral Commissioner (2010) 189 FCR 165 and Russells v McCardel [2014] VSC 287

[2] Godwin v Francis (1870) LR 5 CP 295; Harvey v Facey [1893] AC 552

[3] Hessenthaler v Farzin (1989) 564 A.2d 990

[4] Twynam Pastoral Co Pty Ltd v Anburn Pty Ltd (NSWSC, Young J, No 3551 of 1989, 15 August 1989, unreported)

[5] Shattuck v Klotzbach (2001) 14 Mass L Rep 360; Rosenfeld v Zerneck (2004) 776 NYS 2d 458; Leoppky v Meston (2008) 87 Alta LR (4th) 238; Girouard v Drouet [2012] N.B.J. No 136; Cox v Coughlan [2014] NZHC 164; Crestwood Shops, LLC v Hilkene (2006) 197 S W 3d 641; Joseph Matthew anor v Singh Chiranjeev anor [2009] SGCA 51; SM Integrated Transware Pte Ltd v Schenker Singapore (Pte) Ltd [2005] 2 SLR 651.

[6] 2005 US Dist LEXIS 33003

[7] 2007 US Dist LEXIS 10279

[8] [2016] NSWCA 265