Technology is everywhere and has a significant impact on how we do business day to day. Electronic signatures are becoming more and more popular with many companies now using them on a daily basis. This raises the question, how can a company use an electronic signature and what happens if the signature is applied by someone else without authority?
Under section 127(1) of the Corporations Act 2001 (‘the Act’) a company may execute a document by having two Directors or a Director and Secretary of the company sign the document. The Act does not define ‘sign’. There is limited case law on the topic, however, the Act does not expressly prohibit the use of electronic signatures.
Under section 129(5) of the Act, a person can assume that a document has been duly executed if it appears to be executed in accordance with section 127(1) of the Act.
Australia has long recognised the validity of an electronic signature through the Electronic Transactions Act 1999 (Cth) and the Electronic Transactions (Queensland) Act 2001, however, these pieces of legislation do not apply to the Corporations Act. As such, if you receive a document purporting to be executed by a company pursuant to section 127(1) of the Corporations Act and it appears that the signatures are electronic it may be worthwhile to dig a little deeper to ensure that those people have in fact given authority for their electronic signature to be used.
Recently, the New South Wales Supreme Court in Williams Group Australia Pty Ltd v Crocker [2015] NSWSC 1907 examined the use of a signature of a Director on a Guarantee in circumstances where it was not disputed that the Director had not placed the electronic signature on the document himself. The Director did not make any representations that others had the authority to sign on his behalf. The Court held that the Director would not be liable for the Guarantee as he provided no authority for his electronic signature to be used.
This decision shows that although having an electronic signature is convenient it is vital that authority is sought from the person each and every time their signature is used. Despite it being easy to copy and paste or insert a signature on a document or letter, the signature may mean nothing if authority is not obtained first.
Although the use of an electronic signature, with authority, appears to be effective under the Corporations Act and may be sufficient for documents such as letters, for more formal and significant documents and contracts it is perhaps best to adopt the cautious approach of requiring the document to be printed and signed manually so that it is clear the document has been duly executed in accordance with 127(1) of the Corporations Act.
If you would like advice regarding the use of an electronic signature, or if you feel your electronic signature has been used without your authorisation, please do not hesitate to contact our office.
