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Lawyers at ten paces: Witnessing and execution of documents get the COVID treatment

May 2020

Many documents require the witnessing of signatures for proper execution. The accepted practice has been to witness physically and in person. However, circumstances surrounding COVID-19 have meant that physically witnessing a signature can be difficult. This article considers recent changes that have been put in place under NSW law and nation-wide regarding electronic witnessing and document execution.

WITNESSING SIGNATURES

For many documents like wills and deeds, proper execution may require the witness of the signature executing that document.

By witnessing a signature, the witness is confirming the following:

  • Certifying that the witness was present at the time the document was signed;
  • Certifying that the document was signed by the witness;
  • Certifying that the document was signed by the signatory voluntarily, and was the signatory’s own act (and not the result of coercion); and
  • Represents that they attested to the above at the time they witnessed the signature1.

Without the witness, the document can be considered improperly executed and therefore not binding. This can have serious implications if you are relying on the enforceability of a document to protect your rights or enforce obligations.

A TRADITIONAL TAKE: PHYSICAL IS BEST

The witnessing of a signature has historically been conducted physically. While opportunities to witness a signature electronically have been explored, electronic witnessing has faced heavy criticism in relation to its legal effectiveness.

Particularly, there is doubt whether electronic witnessing is capable of properly enabling the witness to attest to the 4 points mentioned above. For example, it is unclear whether being electronically visible or connected satisfies the requirement of being ‘present’. Furthermore, while a witness may see a document over a video call, it may prove difficult to ensure that the document they receive to sign as the witness via email or fax is the same document that was signed by the signatory. It can equally be challenging to confirm that there was nobody else present in the room off-camera coercing the signatory to sign. This level of uncertainty is problematic due to the legally significant nature of the documents being witnessed. This has led to an unwillingness to adopt electronic witnessing as valid form of witnessing.

WIRELESS WITNESSING: LAW REFORM IN NSW

NSW recently enacted amendments that allow parties to remotely witness signatures and attest to ‘documents’ by way of ‘audio visual link’

‘Audio visual link’ is ‘technology that enables continuous and contemporaneous audio and visual communication between persons at different places’. Video conferencing technologies such as Zoom, Microsoft Teams, Facetime, and Skype will likely fall within this definition.

In having the document witnessed by audio visual link, the following requirements must also be satisfied:

  • Observe the person signing the document in real time;
  • Attest or confirm the signature was witnessed by signing the document or a copy of it;
  • Be reasonably satisfied the signed document is the same document or a copy of it; and
  • Endorse the document or a copy of it with a statement setting out the method used (e.g. audio-visual link) and that it was witnessed in accordance with the New Witnessing Regulations.

‘Documents’ include deeds, agreements, statutory declarations, affidavits and wills among other things.

The new regulations establish that it is now possible to witness the signature of a document by means such as video conferencing where NSW law applies.

LIMITATIONS IN NSW REFORMS

While this may provide relief for many, it is important to acknowledge that there are two key limitations.

First, regulation is temporary and is only expected to last for 6 months (until late October), unless NSW Parliament intervenes to extend it.

Second, the amendment is an amendment to New South Wales law only and does not apply to non-NSW laws. Although Queensland and Victoria are in the process of introducing similar measures, SA and Tasmania appear unlikely to follow suit. It is not clear whether WA, ACT, and NT are considering similar measures. It is therefore worthwhile to stay updated about potential changes that may occur.

COMPANIES SIGNING DOCUMENTS ELECTRONICALY

The operation of the Corporations Act 2001 (Cth) was recently modified to allow for electronic execution2. The modification makes clear that an agreement or deed can be signed electronically and that the document can be in electronic form when executed.

Firstly, the definition of ‘document’ under section 127 has been modified to include a document in electronic form. Section 127(1) itself is also modified such that a document is considered properly executed if either 2 directors, a director and a company secretary, or the sole director/company secretary of a company:

  • Signs a copy or counterpart of the document that is in physical form; or
  • In relation to an electronic communication, a method has been used to identify that person and to indicate their intention regarding the contents of the document. The method must be reliable for the purpose used.

When utilising this method of execution, the copy, counterpart, or electronic communication sent must include the entire contents of the document but need not include the signature of another person.

These changes clarify conclusively that execution under s127 can now be done so electronically where certain requirements are also satisfied.

LIMITATIONS

Like the NSW regulation, this modification will only be in place for 6 months (until early November 2020) subject to any further determination or legislative change. Secondly, while this is an important change for signing contracts and agreements by companies, it has no relevance to witnessing other kinds of documents. Accordingly, the requirement for the physical witness of the signature of an individual executing a document outside of NSW law remains. The change also does not modify the requirement for a natural person to physically sign a deed, even if ultimately that signature is witnessed electronically.

CONCLUSION

Given the limitations of the new regulations both in NSW and nation-wide for companies, it remains best practice for the relevant signature to be witnessed physically where possible. Companies electronically signing pursuant to the modifications to the Corporations Act, or those taking advantage of the NSW changes, should keep in mind the temporary nature of these measure.

It is now also a waiting game for those relying on other jurisdictions follow suit in enacting changes, although given overall easing of restrictions such changes appear less likely. The hope is that such changes will allow parties to ‘keep their distance’.

Material in this article is available for information purposes only and is a high level summary of the subject matter. It is not, and is not intended to be, legal advice. You should first obtain professional legal advice prior to taking any action on the basis of any information contained in this article. This article is copyright. For permission to reproduce this article please email Hazelbrook Legal: enquiry@hazelbrooklegal.com

References

  1. FAQ on Electronic Witnessing of Signatures
  2. Corporations (Coronavirus Economic Response) Determination (No. 1) 2020
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