CORONAVIRUS OUTBREAK – TEMPORARY EXECUTION OF DOCUMENTS

04 May 2020

The recent decision of the Australian Government to implement social distancing and isolation requirements in response to COVID-19 has resulted in a daily changing environment to implement new procedures and to adopt the new “norm”. As we professionally and personally adapt to this ever changing environment, questions have arisen in relation to executing documents in this new “norm” where the execution of documents in wet ink means documents cannot be executed at all or requires significant delays and/or costs.

Background

Schedule 5 of the Coronvirus Economic Response Package Omnibus (Measures No 2) Act gives responsible ministers power to make a determination to:

  1. Vary;
  2. Temporarily remove; or
  3. Substitute;

provisions of an act or legislative instrument requiring or permitting matters such as signatures, witnessing of signatures, verification of the identity of witnesses and the attestation of document. Any determination made by a minister is limited to being in response to COVID 19 and expires on 31 December this year.

On the 25 March 2020, the COVID-19 Legislation Amendment (Emergency Measures) Act 2020 (NSW) amended the NSW Electronic Transactions Act 2000 (NSW) (Electronics Act) to permit regulations to be made to permit alternative arrangements for the signing, witnessing and the attesting of documents under the Act.

Federal, New South Wales, Victoria, Queensland, Tasmania and South Australia have all passed legislation providing for certain decision makers to make regulations amending arrangements for the signature, witnessing and attestation of documents. We expect the remaining States and Territories will follow.

On the 23 April 2020, the New South Wales Government passed the Electronic Transactions Amendment (COVID-19 Witnessing of Documents) Regulation 2020 (NSW) (Temporary Regulations) allowing signatures on documents, including wills, powers of attorney (including enduring powers of attorney), deeds, affidavits and statutory declarations to be witnessed and attested by audio visual link during COVID-10. The Temporary Regulations expire in six months.

Witnessing and attestation by audio visual link

Where a document is required to be witnessed and attested under NSW law, the Temporary Regulations provide that a document can be witnessed and attested through an audio visual link.

Documents that can be witnessed and attested are wills, powers of attorney (including enduring powers of attorney), deeds, agreements, affidavits and statutory declarations.

An audio link must permit the continuous and contemporaneous audio and visual communication between persons at different places including video conferencing such as Zoom, Skype, Microsoft Team or Face Time.

The Temporary Regulation states that when using visual technology to witness a document, the witness must:

  1. Observe the person signing the document (Signatory) sign the document in real time;
  2. Attest or otherwise confirm the signature was witnessed by signing the document or a copy of the document;
  3. Be reasonably satisfied that the document the witness signs is the same document, or a copy of that document;
  4. Endorse the document, or the copy of the document, with a statement stating the method used to witness the signature of the signatory and that the document was witnessed in accordance with the Temporary Regulations, such as:

This document was signed in counterpart and witnessed over audio visual link in accordance with clause 2 of Schedule 1 to the Electronic Transactions Regulation 2017.

In New South Wales, deeds must be witnessed. It may be prudent to convert a deed to an agreement and insert a nominal consideration. This will alleviate the need to have the document witnessed. However, there may be some documents that this is not acceptable to do so. Please contact us if you wish to discuss.

Whilst the Temporary Regulations have gone a significant way to alleviate uncertainty in relation to the execution and attestation of documents in COVID-19, there is still questions in relation to the execution of documents by companies and in particular spilt execution.

Split execution occurs when two company officers execute a document on behalf of a company under section 127(1)(a) or (b) of the Corporations Act 2001 (Cth) (Corporations Act) by affixing their signatures on different counterparts, instead of both signing the same document. A recent case of Bendigo and Adelaide Bank Limited v Pickard [2019] SASC 123 stated that two signatories each signing a separate electronic document is not likely to be a valid execution under section 127 of the Corporations. Accordingly, in order to be a valid execution by a company, the signatures are required to sign the same document.

However, if an agreement is not signed under section 127 of the Corporation it does not mean it is not binding, it merely means that the other party to the agreement may not be able to rely on the statutory assumptions and will require further evidence of the authority to satisfy themselves that the officers who executed the document on behalf of the company have the necessary authorities to do so.

Section 128 and 129 of the Corporations Act provides that a person who deals with a company is entitled to the benefit of a number of statutory assumptions unless that person knows or suspects the relevant assumption to be incorrect. In particular, a person dealing with a company is entitled to assume that a document has been duly executed by the company if it is signed in accordance with section 127(1) of the Corporations Act.

When dealing with a company, there are a number of ways to minimise the risk with spilt execution such as:

Hard copy documents

The first and probably the most obvious is arrange for the first officer to execute the hard copy document with a wet-ink signature and then arrange for the document to be couriered to the second officer for execution. Whilst this may be slightly more expensive and less time efficient, this remains to be the safest method in order to rely on the statutory assumptions in sections 128 and 129 of the Corporations Act.

Authorised agent appointed

Whilst less common, section 126 of the Corporations Act provides that a company can execute a contract without using a common seal if the power to do so is exercised by an individual acting with the company’s express or implied authority and on behalf of the company. In order to ensure that the proper authorities are in place, the company must:

  1. Pass the necessary resolutions of the company to permit the agent to execute the documents; and
  2. Whilst a resolution may be sufficient to confer authority on the agent to execute an agreement, if an agent is required to execute a deed on behalf of a company, then the authority by the company to permit the agent to execute deeds, must also be undertaken by a deed.

As previously noted above, a company may consider converting the deed to an agreement for nominal consideration to alleviate the need for a witness.

Where a party has agreed to accept execution by an agent on behalf of a company, that party should satisfy itself that the agent has been validly authorised to execute the document. The party will need to keep records of the authority and in particular, may need to produce them at the Court or at Land Registry in their jurisdiction when lodging documents to prove the validity of the authority.

Modified split execution

Spilt execution occurs where the first officer of the company signs the document with a wet-ink signature and then faxes or emails a PDF copy to the second officer who then prints and signs the execution page. As previously noted above, the Courts and practitioners are divided as to whether this satisfies the requirements of section 127 of the Corporations Act.

There are doubts as to whether this is considered binding as the officers are not affixing their signature to the same document. We would recommend adopting this method as a last resort.

Registration

Before accepting a document to be signed electronically, we recommend that you obtain the consent of the other party to this process and confirm that electronic execution will be accepted by the Court, government agency, land registry services or financial institutions.

This article was written by Kathy Gray, Partner.

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