In this age of electronic communications and documents, we are often asked to advise on how a legal document can be signed validly.
There have been a series of cases involving Bendigo and Adelaide Bank, which has sought to recover loans to investors in failed Great Southern Group investment schemes. One of these cases is Bendigo and Adelaide Bank Limited v Pickard  SASC 123. This case considered the validity of signing of a deed of guarantee (there are special requirements for signing of deeds). The deed was “signed” by attaching the electronic signatures of certain officers of a company. Bendigo argued that this was in accordance with section 127(1) of the Corporations Act 2001, which allows two directors or a director and secretary of the company to sign for a company.
The company claiming the deed was signed obtained resolutions of its board generally approving the loan. However, there were no resolutions or authorisations from the officers to place their electronic signatures on the deed. The Supreme Court of South Australia ruled that this form of signing was invalid.
The Court also ruled that section 127(1) of the Corporations Act contemplates a document being executed by two officers signing it and so a single document must be signed by both officers. It is insufficient that two signatures appear on different counterparts or copies of the same document because no one counterpart or copy would be properly executed by the company. However, the Court also accepted that, if done properly, electronic signatures could be valid under section 127(1) of the Corporations Act.
Having failed on the validity of execution of the deed, Bendigo argued that the contents of the deed were nevertheless a contract and it sought to prove the existence of the contract. Bendigo failed in this also, because the Court ruled that there was no consideration, one of the essentials for a contract,
A document, including a deed, can be signed validly with an electronic signature, if the person personally authenticates his or her signature on the document.
- A deed signed by a company under section 127(1) of the Corporations Act must be signed physically by both company officers on the same page or it is possible to be signed with electronic signatures with correct authorisations and application of signatures on the one document.
- Caution is required with electronic signatures and in cases of doubt it is best to require physically signed documents.
- Persons (as distinct from companies) who are parties to a deed must have their signatures witnessed, which requires great care and caution if it is to be done using electronic signatures.
- Contracts that do not have to be deeds can be made validly despite irregularities in signing.
- This is a reminder that there must be consideration for a valid contract to be made.
- Where there is no consideration or consideration is doubtful, we recommend that the document be signed as a deed.
- It is perfectly valid for different parties to a document to sign different counterparts of the same document if allowed by the document.
Please contact myself or one of the partners in our commercial team, John MacPhail or Malinda Kuo, should you have any queries or require any assistance.