Electronic Execution of Deeds
It almost goes without saying that the COVID-19 Pandemic has caused change and upheaval in almost every aspect of life. Law is no exception. Lawmakers from all over the world have struggled to keep up with the sheer amount of change and uncertainty caused by COVID-19. This has included forcing lawmakers to deal with even most mundane age-old practices, such as how we sign documents.
Although there have been temporary COVID-19 relief provisions permitting electronic execution of deeds in Queensland (and all other states) since early last year, we now finally have insight into the long-term way forward in Queensland.
We set out below the key practical takeaways from the new proposed amendments for deeds in the Justice Legislation (COVID-19 Emergency Response— Permanency) Amendment Bill 2021.
Why have deeds been treated differently to contracts?
Firstly, it is important to appreciate that deeds are just a special kind of contract. Unlike contracts, deeds:
- do not require consideration (i.e. the exchange of something of value between the parties);
- can bind parties immediately upon execution; and
- have a 10 year rather than a 7 year limitation period.
This is why deeds have historically had more pomp and formality than your average contract (i.e. the need to be signed, sealed and delivered with a wet-ink signatures on be on paper, parchment or velum).
What are the proposed amendments regarding general requirements for making a deed?
The Bill provides that a document takes effect as a deed if the document:
- is in writing;
- contains a clear statement that the document is a deed;
- is executed pursuant to the new division in the Property Law Act 1974 (Qld) (‘the Act’); and
- is delivered in accordance with section 47 of the Act.
What are the proposed requirements for signing electronically?
In relation to item 3 above, the Bill provides that a deed can be signed electronically provided an ‘accepted method’ is used. This means that:
1. the method of signing the deed must identify the signatory and the signatory’s intention to be bound. An appropriately worded signing block should suffice to satisfy this requirement; and
2. the signing method used must be either:
- as reliable as appropriate for the purposes for which the document is made or signed, having regard to all the circumstances, including any relevant agreement. This means that the more serious the document (for e.g. a personal guarantee), the more serious the steps that should be undertaken to ensure the veracity of execution; or
- proven in fact to have identified the signatory and their intention to be bound, by itself or together with further evidence. This again means that the parties should take steps to verify the signatories; and
3. the signing method used is consented to by each of the document’s signatories. Consent to a particular method can be readily demonstrated in fact if the other parties use the same method.
To satisfy these signing method requirements, we recommend:
- using a reputable platform like DocuSign; and
- conducting an independent verification of the email accounts used by other parties for execution. For example, making a quick call to a signatory to independently verify their execution is a good way to satisfy the signing method requirements. It should be a red flag if the executed document comes to you via an email account or person that you have not previously dealt with.
How can individuals execute deeds?
An individual can execute a document as a deed by signing it with a wet-ink signature on paper, or with an electronic signature (as noted above). The parties to the deed can execute using mixed methods of signing (i.e. some electronic and some wet-ink) provided they sign identical counterparts.
Witnesses will no longer be required for an individual’s execution of a deed.
How can corporations execute deeds?
The Bill permits corporations to execute deeds in a number of ways, but the primary way for execution without using the company common seal is:
1. 2 directors of the corporation; or
2. 1 director and 1 secretary of the corporation; or
3. for a proprietary company that has a sole director—that director, if—
a. the director is also the sole company secretary; or
b. the company does not have a company secretary; or
4. a lawfully authorised agent or attorney of the corporation, whether or not the agent or attorney is appointed under seal.
The Bill is clear that it does not limit the ways in which a company may execute a deed. This means that companies may still prefer to expressly execute a deed pursuant to section 127 of the Corporations Act 2001 (Cth).
Companies can execute a document as a deed by signing it with a wet-ink signature on paper, or with an electronic signature (as noted above). Split execution by directors is also permitted provided the directors sign identical counterparts.
Witnesses are not required for a corporation’s execution of a deed.
What are the exclusions in the proposed amendments?
The Bill specifically excludes the following from being signed electronically:
1. Titles Documents
The Bill contemplates that documents made pursuant to the Land Act 1994 (Qld) or the Land Title Act 1994 (Qld) may still need to signed on paper with wet-ink signatures. This means that if you are dealing Titles Queensland, you will need to take specific advice from a conveyancer of property lawyer about the appropriate way to execute that document.
2. Powers of Attorney
The Bill specifically provides that an individual cannot execute a document with an electronic signature if it contains a power of attorney. This is intended as a safeguard due to the special risks involved with granting powers of attorney.
However, this exclusion does not apply to a deed containing a power of attorney if that power of attorney is part of a commercial or other arms-length transaction and the purpose of giving the power of attorney is for the purpose of the commercial arms-length transaction.
Helpfully, the Explanatory Note to the Bill specifically contemplates that the power of attorney exclusion does not include the following common documents:
- mortgages, leases and contracts for sale;
- contracts for off the plan sales of community titles scheme lots, where a power of attorney is given by the buyer in favour of the developer/seller to enable the developer to vote on particular disclosed matters at body corporate meetings for a period of time after the scheme is created;
- contracts requiring dealings to be signed and registered after settlement, where the buyer grants an irrevocable power of attorney in favour of the seller to sign a dealing if the buyer fails to do so within a specified timeframe; or
- development agreements, co-ownership agreements and joint venture agreements containing powers of attorney exercisable by a non-defaulting party in certain circumstances to enable to project to proceed.
The Bill also amends the Powers of Attorney Act 1998 (Qld) to allow businesses to execute general powers of attorney electronically.
When do the proposed amendments take effect?
The Bill has not yet been passed by Parliament. It has been referred to a committee which is due to report back in November 2021. The Bill also provides that the commencement date, once passed, will be a date declared by proclamation. When the proposed amendments come into effect, this article will be updated accordingly.
This article is educational only and does not constitute legal advice. For more articles and case note, visit our blog page.