COVID-19 changes to electronic execution of documents

In the December 2019 issue of The Local Law we outlined the position in regards to reliance upon electronic execution of documents.  Since that time, the COVID-19 pandemic has introduced novel challenges in this area and the pre-COVID-19 legislation simply did not envisage the issues that parties may have in receiving, signing and exchanging hardcopy documents during times of self-isolation and social distancing restrictions.  Recently, various legislative changes have temporarily altered this position and local governments have been asking us for advice on what these changes mean.

Queensland legislation

In May 2020, Queensland passed new temporary regulations, the Justice Legislation (COVID-19 Emergency Response – Wills and Enduring Documents) Regulation 2020 (Qld) and the Justice Legislation (COVID-19 Emergency Response – Wills and Enduring Documents) Amendment Regulation 2020 (Qld) (collectively, the Regulations), which changed the witnessing and signing requirements for documents in Queensland. The Regulations are due to expire on 31 December 2020.

The Regulations have explicitly done away with the requirement that a deed had to be on paper (effectively requiring wet signatures) and confirmed that a deed will have effect even if it is in electronic form and signed electronically. Additionally, deeds may be signed in counterpart and do not need to be signed in the presence of a witness.

The Regulations also confirm that such a deed will have effect even where a counterparty does not consent to it being made or signed electronically which is a different position to the Electronic Transactions (Queensland) Act 2001 (Qld) which had generally governed the electronic execution of documents in Queensland.

Corporations Act

The Electronic Transactions Act 1999 (Cth) explicitly does not apply to the Corporations Act 2001 (Cth) (Corporations Act) meaning that there had been doubt whether electronic execution of a document satisfied the execution requirements under section 127(1) of the Corporations Act. In particular, this meant that if a local government entered into a contract with a company which was electronically executed by its directors, the local government may have been unable to rely on the assumptions about valid execution under section 129 of the Corporations Act.

To overcome this issue, in May 2020 the Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 (Determination) was issued which amended section 127 of the Corporations Act to allow companies registered under the Corporations Act to execute documents electronically. The Determination is currently due to expire on 5 November 2020.

Under the Determination, in order to rely on a company’s electronic execution, you would need to be satisfied that:

• the person signing can be reliably identified;
• the method of electronic communication indicates that person’s intention about the document’s contents and the intention to be bound by the document; and
• the method of execution and communication is as reliable as appropriate for the purpose for which the company is signing.

Provided you are satisfied with the above, you may rely on the statutory assumption that the document has been validly executed and, in conjunction with the Queensland Regulations, this assumption extends to deeds.

The Determination also allows for company officeholders to execute in counterparts which means that two directors signing on behalf of one company do not need to sign the same physical document. Prior to the Determination, the prevailing view had been that such method of execution would not satisfy the requirements of section 127(1). Importantly, the counterparts must contain the entire contents of the document in question, not just the execution pages.

Key takeaways

• the Regulations and Determination provide relief in respect of signing requirements, particularly as they apply to deeds which have historically required wet ink signatures.
• if local governments want to utilise these changes and expand its use of electronic execution it may want to look at its internal policies to ensure they align with the legislative requirements.
• although the Regulations and Determination expand the use of electronic signatures, local governments should always ensure that any processes implemented aim to limit risks (e.g. authorisation of signatories, fraud) and that available digital systems such as AdobeSign and DocuSign are utilised which provide encryption protection and an additional layer of authentication of the executing parties.

Although a welcome change, the Regulations and Determinations are at this stage only temporary measures and local governments should seek advice on this issue towards the end of the year to confirm which documents can still be executed electronically and, most importantly, which ones shouldn’t.

Many thanks to David Saunders for his help in putting this article together.

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.