Electronic execution

eSignatures cannot generally be used to sign deeds. However, eSignatures are currently (temporarily) permitted due to the COVID-19 pandemic under some circumstances as set out below.

Can I use an eSignature to sign documents due to COVID-19?

eSignatures cannot generally be used to sign deeds. However, eSignatures are currently (temporarily) permitted due to the COVID-19 pandemic under some circumstances as set out below.

Can I use an eSignature to sign documents due to COVID-19

eSignatures cannot generally be used to sign deeds, and there is a risk of invalidity for using eSignatures to sign agreements too.  However, eSignatures are currently permitted under some circumstances:

  • when signing under section 127 of the Corporations Act (without a common seal);
  • in NSW, when specific video-witnessing requirements are met;
  • in Victoria, under certain conditions; and
  • in Queensland, under certain conditions.

These are temporary measures during the COVID-19 pandemic that have been extended until various dates in 2021 and 2022 or have been made permanent (in the case of Victoria).

eSigning under section 127

The Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (Cth)  (the Commonwealth Measures) (temporarily) permits electronic and split executions pursuant to section 127 of the Corporations Act (Cth) during the COVID-19 pandemic. These measures have been extended until 31 March 2022, but draft legislation making permanent changes to allow for electronic execution under section 127 has been released.

Before the Commonwealth Measures, there was a divergence of opinion as to whether electronic execution or split execution could be effective under section 127.  Although Commonwealth legislation exists that permits transactions to occur electronically (see the Electronic Transactions Act 1999 (Cth)), this legislation does not apply to the Corporations Act.

Comments by Stanley J in obiter in Bendigo and Adelaide Bank Limited v Pickard [2019] SASC questioned the validity of split executions and electronic execution generally (that is, section 127 requires officers of a company to execute a single, static physical document).

This uncertainty meant that in practice when companies executed under section 127 many did so by wet ink signature only.

The Commonwealth Measures provide that execution under section 127 can be done:

  • electronically – in which case, the method of electronic execution must be reliable and appropriate for the purposes (or proven in fact) to identify and indicate the person’s intention in respect of the contents of the document (which mirrors the approach under the Electronic Transactions Act 1999(Cth)); and
  • where more than one signatory is required, permits the use of ‘split executions’ – where the two officers of a company execute separate counterparts of a document, whether in electronic or physical form.

In each case, the signature (whether physical or electronic) must be affixed to the entire document, but does not need to include the signature of any other person who has/will be signing the document.  That is, the practice of signing an execution page that has been separated from the remainder of the document will not meet the requirements of the Commonwealth Measures.

The Commonwealth Measures also extends the statutory assumption under section 129(5) of the Corporations Act to documents that appear to have been executed in accordance with the Commonwealth Measures.

Under these new rules, a much wider range of methods can be used to sign documents, including copying and pasting a signature into a document and using cloud-based electronic execution tools.  As signatories do not need to sign the same copy of a document, it is now possible for 2 directors/company secretary to sign separate copies of the same document.

The Commonwealth Measures do not relax the practical need for companies to retain a copy of executed documents, and where ‘split execution’ occurs, copies of each executed document should be retained.  Given the express requirements of the Commonwealth Measures regarding signatures being affixed to the entire document, the entire signed document should be retained (and not just the signature pages).

The Commonwealth Measures do not change the existing position under section 127 for execution using a common seal.  The Commonwealth Measures also do not affect the laws or requirements of any other jurisdiction which may limit which documents can be executed electronically.

eSigning in NSW

The Electronic Transactions Amendment (COVID-19 Witnessing of Documents) Regulation 2020 (the NSW Regulations) have been introduced to provide for altered arrangements for witnessing of signatures and the attestation of certain documents governed by NSW law.  These changes have been extended until the end of 2021.

The changes to permit witnessing and attesting via audio visual link apply to wills, powers of attorney (or enduring power of attorney), deeds or agreements, enduring guardianship appointments, affidavits and statutory declarations governed by NSW law.

The NSW Regulations do not change which documents may or may not be executed electronically in NSW – only how documents may be witnessed and attested. However, they pave the way for deeds to be signed electronically because they allow remote witnessing.

The NSW Regulations make a number of changes, including:

  • Permitting remote witnessing of signatures and attestation of documents by audio visual link (which would include via video-technology that enables a continuous and contemporaneous audio and visual communication between persons at different places, such as Skype, WhatsApp, FaceTime and Zoom) provided certain conditions are met, including that the witness must:
    • observe the signatory sign the document in real time (on a practical note, this will require the act of signing to be seen on-screen (for example, witnessing the hand of the signatory sign the document, whether by wet signature or electronically));
    • confirm they witnessed the signature, either by signing a counterpart of the signed document, or, where the signatory scans and sends a copy of the signed document to the witness electronically, by countersigning that document;
    • include a statement specifying the method used to witness the signatory’s execution and that the document was witnessed in accordance with the Regulations; and
    • be reasonably satisfied the document they sign is the same document, or a copy of the document, that they observed the signatory sign.

The NSW Regulations do not require a witness to be physically located in NSW when witnessing a signature by audio-video link.  They also do not seek to limit the ways that a witness may confirm the signature was witnessed, provided the conditions are met.  However, the example methods provided for in the NSW Regulations all refer to the witness signing a copy of the document – the advantage of these methods is that they mitigate the risk of the witness confirming a different document from that which was signed. Whatever method is used to confirm, the witness should do so as soon as practicable after having witnessed the signature.

  • Allowing an Australian legal practitioner to take or make any oath declaration or affidavit required for the purpose of any court or tribunal; for the registration of any instrument; or for any arbitration.  (Normally, the position in NSW is that these can only be made or taken by a justice of the peace, a notary public, a British Consular Officer or an Australian Consular Officer.)
  • Allowing statutory declarations (other than those required for the purposes of any court or tribunal to which the above applies) to be made before a broader range of “authorised witnesses” to include dentists, pharmacists, medical practitioners and veterinary surgeons, among others.  This change temporarily brings the NSW position on “authorised witnesses” in line with the existing Commonwealth position.

The NSW Regulations address the uncertainly around using cloud-based eSignature tools (such as AdobeSign and DocuSign) to witness documents.  As, provided the conditions in the Regulations are met, it is acceptable that the functionality in these tools creates a separate identical copy of the document for the witness to affix their signature.

The NSW Regulations also do not affect the laws or requirements of any other jurisdiction.  Similar reforms have been introduced in Victoria and Queensland, however there are no temporary measures for electronic signing in other Australian jurisdictions.

Could I use an eSignature to sign a deed (prior to COVID-19)?

eSignatures cannot generally be used to sign deeds.  However, eSignatures are (temporarily) permitted due to the COVID-19 pandemic under some circumstances.  Please refer to the section Can I use an eSignature to sign documents due to COVID-19?

Subject to the exception in NSW noted below, and more recently, Victoria, Australian law does not recognise the validity of a deed which exists in electronic form. The common law requirement that deeds be on ‘paper, parchment or vellum’ prevails, meaning that deeds purported to be executed in electronic form with eSignatures are not valid.

However, if the requirements for an agreement are otherwise met (i.e. there is consideration), a court may find that such a ‘deed’ takes effect as a contract, which can exist in electronic form (the ‘paper, parchment or vellum’ common law requirement for deeds has never been recognised as extending to ordinary agreements) and can in some cases be signed electronically (discussed in further detail below).

Specifically in NSW, following the commencement of the Conveyancing Legislation Amendment Act 2018 (NSW) on 22 November 2018, s 38A of the Conveyancing Act 1919 (NSW) (NSW Conveyancing Act) now permits deeds to be created (and therefore exist) in electronic form and to be electronically signed and attested in accordance with Part 3 of the NSW Conveyancing Act.

Section 38(1) of the NSW Conveyancing Act (one of the sections in Part 3), then provides that every deed (whether or not affecting property) shall be signed as well as sealed and shall be attested by at least one witness not being a party to the deed.

While it may be thought that deeds can accordingly be signed electronically in NSW, the lowest risk position is that all deeds should continue to be physically printed and signed by wet signature. That is for two reasons.

First, in the case of companies, s 38(5)(a) of the NSW Conveyancing Act expressly states that the execution requirements set out in s 38 do not affect ‘the execution of deeds by corporations’.

As a result, the NSW Conveyancing Act cannot be seen of itself to provide an alternative way for a company to execute a deed.

If a company relies on execution under s 127 of the Corporations Act by the signature of two directors, a director and company secretary or the sole director and secretary of a proprietary company, or the witnessing of the fixing of the company’s seal by those persons (see the discussion in the Execution of Deeds section of this app), that would ordinarily trigger the operation of s 10 of the Electronic Transactions Act 1999 (Cth) (ETA).  That is because s 127 of the Corporations Act may be read as a law of the Commonwealth requiring the signature of a person within the meaning of s 10 of the ETA.

Importantly, s 10 of the ETA applies to validate a document executed electronically provided the conditions in s 10 are satisfied (including proper identification and confirmation of the intention of the person signing the document and consent to the use of an electronic signature by the counterparty).

However, s 10 is specifically excluded from applying to the Corporations Act by item 30 of schedule 1 of the Electronic Transactions Regulations 2000 (Cth).

Arguably, the specific exclusion of the Corporations Act from the scope of the ETA is extrinsic evidence of the Commonwealth Parliament’s intention that a company should not be able to execute a deed (or an agreement) electronically.

It would remain open for a company to execute a deed under s 126 of the Corporations Act (but as noted in the Execution of Deeds section of this app, authority to execute a deed, as opposed to an ordinary agreement, must itself be conferred by deed and not just a board resolution). Unlike s 127, the terms of s 126 cannot be read as imposing a requirement for the signature of a person on behalf of a company, so that the ETA (and more importantly the inference against the validity of an electronic signature to be drawn from the exclusion of the Corporations Act from the operation of the ETA) would not apply.  In that case, arguably the electronic execution of a deed by an agent on behalf of a company, if expressly authorised by the company in a deed, could be valid.  However, there is no direct case law on point and in any event, in practice, it is common for a counterparty to insist on execution under s 127 so that the counterparty can take advantage of the presumptions of regular execution under ss 128 and 129 of the Corporations Act (see the discussion in the Execution of Deeds section of this app).

Secondly, for natural persons, a further problem is that, under s 38(1A) of the Conveyancing Act, a deed executed by an individual must be witnessed.  It is not clear exactly how electronic witnessing can occur and no guidance is provided by the Conveyancing Act.

It is arguable that online signature tools may create a new copy of a document with each new execution, which would mean that the requirement for a witness to sign the same deed as the underlying signatory in the presence of that signatory would not be satisfied.

Pending any further legislative amendments to the Conveyancing Act (including by way of regulations) and, in the case of companies, s 127 of the Corporations Acta deed should be executed by way of wet signature in all Australian jurisdictions to ensure the deed is valid.

What is an eSignature?

An electronic signature or eSignature is a term used to describe a class of methods for electronically replicating or replacing a paper signature (a paper signature is sometimes called a ‘wet signature’ referring to the use of ink and to distinguish it from an eSignature).

There are many ways in which an eSignature can be created, including:

  • scanning a paper signature and inserting it in an electronic document (or multiple documents over time);
  • clicking on an “agree” button on a website;
  • signing using a digital pen, finger or a mouse onto a trackpad;
  • typing your name; or
  • using a web-based authentication system to affix an electronic version of your signature to a document.

The concept of an eSignature has not been defined by Australian law. The UNCITRAL Model Law on Electronic Signatures 2001, defines an electronic signature as follows:

“Electronic signature” means data in electronic form in, affixed to or logically associated with, a data message, which may be used to identify the signatory in relation to the data message and to indicate the signatory’s approval of the information contained in the data message.

Can I use an eSignature to sign a deed?

eSignatures cannot be used to sign deeds. 

Subject to the exception in NSW noted below, Australian law does not recognise the validity of a deed which exists in electronic form. The common law requirement that deeds be on ‘paper, parchment or vellum’ prevails, meaning that deeds purported to be executed in electronic form with eSignatures are not valid.

However, if the requirements for an agreement are otherwise met (i.e. there is consideration), a court may find that such a ‘deed’ takes effect as a contract, which can exist in electronic form (the ‘paper, parchment or vellum’ common law requirement for deeds has never been recognised as extending to ordinary agreements) and can in some cases be signed electronically (discussed in further detail below).

Specifically in NSW, following the commencement of the Conveyancing Legislation Amendment Act 2018 (NSW) on 22 November 2018, s 38A of the Conveyancing Act 1919 (NSW) (Conveyancing Act) now permits deeds to be created (and therefore exist) in electronic form and to be electronically signed and attested in accordance with Part 3 of the Conveyancing Act.

Section 38(1) of the Conveyancing Act (one of the sections in Part 3), then provides that every deed (whether or not affecting property) shall be signed as well as sealed and shall be attested by at least one witness not being a party to the deed.

While it may be thought that deeds can accordingly be signed electronically in NSW, the lowest risk position is that all deeds should continue to be physically printed and signed by wet signature.  That is for two reasons.

First, in the case of companies, s 38(5)(a) of the Conveyancing Act expressly states that the execution requirements set out in s 38 do not affect ‘the execution of deeds by corporations’.

As a result, the Conveyancing Act cannot be seen of itself to provide an alternative way for a company to execute a deed.

If a company relies on execution under s 127 of the Corporations Act by the signature of two directors, a director and company secretary or the sole director and secretary of a proprietary company, or the witnessing of the fixing of the company’s seal by those persons (see the discussion in the Execution of Deeds section of this app), that would ordinarily trigger the operation of s 10 of the Electronic Transactions Act 1999 (Cth) (ETA).  That is because s 127 of the Corporations Act may be read as a law of the Commonwealth requiring the signature of a person within the meaning of s 10 of the ETA.

Importantly, s 10 of the ETA applies to validate a document executed electronically provided the conditions in s 10 are satisfied (including proper identification and confirmation of the intention of the person signing the document and consent to the use of an electronic signature by the counterparty).

However, s 10 is specifically excluded from applying to the Corporations Act by item 30 of schedule 1 of the Electronic Transactions Regulations 2000 (Cth).

Arguably, the specific exclusion of the Corporations Act from the scope of the ETA is extrinsic evidence of the Commonwealth Parliament’s intention that a company should not be able to execute a deed (or an agreement) electronically.

It would remain open for a company to execute a deed under s 126 of the Corporations Act (but as noted in the Execution of Deeds section of this app, authority to execute a deed, as opposed to an ordinary agreement, must itself be conferred by deed and not just a board resolution). Unlike s 127, the terms of s 126 cannot be read as imposing a requirement for the signature of a person on behalf of a company, so that the ETA (and more importantly the inference against the validity of an electronic signature to be drawn from the exclusion of the Corporations Act from the operation of the ETA) would not apply.  In that case, arguably the electronic execution of a deed by an agent on behalf of a company, if expressly authorised by the company in a deed, could be valid.  However, there is no direct case law on point and in any event, in practice, it is common for a counterparty to insist on execution under s 127 so that the counterparty can take advantage of the presumptions of regular execution under ss 128 and 129 of the Corporations Act (see the discussion in the Execution of Deeds section of this app).

Secondly, for natural persons, a further problem is that, under s 38(1A) of the Conveyancing Act, a deed executed by an individual must be witnessed.  It is not clear exactly how electronic witnessing can occur and no guidance is provided by the Conveyancing Act.

It is arguable that online signature tools may create a new copy of a document with each new execution, which would mean that the requirement for a witness to sign the same deed as the underlying signatory in the presence of that signatory would not be satisfied.

Pending any further legislative amendments to the Conveyancing Act (including by way of regulations) and, in the case of companies, s 127 of the Corporations Act, a deed should be executed by way of wet signature in all Australian jurisdictions to ensure the deed is valid.

Could I use an eSignature to sign an agreement generally (prior to COVID-19)?

For electronic execution of an agreement, as opposed to a deed, it is necessary to distinguish between the position for companies and the position for natural persons.

For companies, the same position referred to above in relation to deeds applies to the execution of an agreement.

Specifically, s 127 of the Corporations Act by its terms extends to both deeds and agreements, so that if a company seeks to rely on execution under that section, the inference against the validity of an electronic signature to be drawn from the exclusion of the Corporations Act from the operation of s 10 of the ETA would apply.

Again, a company could still rely on s 126 of the Corporations Act to confer authority on a person to execute an agreement electronically on behalf of the company (and, unlike for a deed, authority to execute an ordinary agreement need not itself be conferred by deed – see the discussion in Execution of Agreements section of this app) and in that case it could be argued that electronic execution is valid.  However, in the absence of any specific case law on point, the safest course is for both deeds and agreements to be executed on behalf of a company by wet signature.  

For natural persons, generally there is no legal requirement that an agreement be signed (or even that it be in writing) and therefore there is no legal impediment to using an eSignature.

Similarly, many contracts are made online simply by selecting an ‘I agree to these terms and conditions’ checkbox and paying by credit card.  There is no question that contracts of that kind are legally valid and enforceable.

However, there are certain types of agreements that must be writing and/or signed in order to be legally binding.  These include contracts for the sale of land, certain building contracts and unsolicited sales contracts.  In those cases, the use of eSignatures will only be possible if:

  • Expressly authorised in the relevant legislation governing the transaction – this is very rare (one example being the electronic execution of a security agreement under the Personal Property Securities Act 2009(Cth));
  • authorised by implication under the relevant legislation governing the transaction – however, this basis of validation is very uncertain and we do not advise relying on it; or
  • the electronic execution complies with the relevant Electronic Transactions Act which applies in the jurisdiction selected by the parties to govern their transaction (there is an Electronic Transactions Actwith almost identical provisions in each state and territory, as well as at Commonwealth level).

If an eSignature is used in one of these cases, we recommend the following:

  • use a sophisticated e-signature tool which is in regular commercial use and has a sound reputation;
  • to maximise security, use additional available authentication options, such as two-factor authentication by a phone code or message;
  • advise the counterparty in advance that you intend to execute the agreement electronically; and
  • be as vigilant in reviewing a counterparty’s eSignature as you would be for any other signature. If something seems suspicious or unusual, it should be promptly investigated.