Last November, there were amendments made to the Conveyancing Act 1919 (NSW) as part of the Conveyancing Legislation Amendment Bill 2018 (NSW).
As part the amendments, Townsends Business and Corporate Lawyers said that section 6C was inserted to prescribe what does and does not constitute an electronic signature.
“Section 23C(3) was [also] inserted to note that ‘a requirement for writing may be satisfied in electronic form and a requirement for writing to be signed may be satisfied by electronic signature’,” said Townsends.
Section 38A was also added permitting that “a deed may be created in electronic form and electronically signed and attested in accordance with this part”.
Previously, deeds could not exist solely in electronic format, the law firm said, as they had to be “writing on paper or parchment” and the only types of documents that could confidently signed digitally or electronically were those that required no attestation (i.e. no witness).
In order to witness a document, the person also had to be physically present at the time of signing, as it allowed for witnesses to confirm the testator’s capacity, understanding or freedom from pressure.
The law firm pointed out that there are some differences between electronic and digital signatures.
“The former is more generic, effectively operating as a representation of a person’s signature — a picture file, typing one’s name at the bottom of a communication, and so on. The latter is much more robust, relying on both private key and public key cryptography to confirm validity,” it explained.
“Digital signatures include hidden data that can be verified, making them a much more secure way of confirming the identity of the signatory of a document.”
Theoretically, the requirements to confirm a mark’s validity should be the same regardless of whether they are applied to the testator or witness, it said.
“It stands to reason, then, that the method for electronic witnessing should function in much the same way that the method for electronic signing does. This logic, however, fails to consider the context in which attestations exist.”
The act of witnessing a signature, it said, is carried out on legal documents of higher importance.
“Any person with access to the aforementioned representation, frequently in the form of a picture file, may attach it to a document. If the original signer fails to keep the file secure, the system is readily open to abuse,” the law firm warned.
While electronic signatures have been common practice for more mundane documentation such as sales invoices, for example, NSW is now allowing testators to rubber-stamp both their own signature and their witness’s on documents such as their loan agreements, it said.
The changes to the NSW Conveyancing Act, it said, may actually raise more issues than they answer, however.
Townsends said it is unclear what a witness must do before actually digitally singing the document, for example, other than applying their digital signature.
“Do they have to stand or sit alongside the signatory in front of the computer that the signatory is using to digitally sign the document and watch them do so?” it questioned.
“How do they know that the passwords the signer is using are their passwords and that they haven’t been obtained by subterfuge or hacking from the original creator of the passwords?”
The changes also raise questions around how the signer is connected with passwords and the digital process and whether they can witness the document from their own computer, it said.
“If they cannot attest to the accuracy, reliability and security of the process, how can they say that they have actually witnessed anything? Should we do away with witnessing altogether and simply rely on the security provided by the digital signing process?” the law firm said.
“The cardinal purpose of a witness’s attestation may have become redundant. Perhaps this is a sign of how the digital change will continue to roll out across the uber-conservative legal sphere. Or perhaps this is simply a piece of legislation that has not been thought through carefully enough.”
The other thing to consider is what does the corporations act say about digital signatures when it comes time for company’s to sign minutes and resolutions and other things.
Last time I checked it didn’t allow digital signatures – so this covers companies of course but it also covers Trusts where the trustee is a company.
This is where we need the real reform in the legislation covering digital signatures.
An Auskey is not easy to obtain. The much maligned MyGov is another such example. I feel comfortable these are well fortressed. As for the acceptance of digital signatures, there is “user demand” and it seems many are prepared to trade-off veracity and even security, for ease of use.
Like the readiness to provide social media platforms our personal data has provided to be a double edged sword, the wide-spread use of digital signatures will no doubt have it’s day in court, or should I say years.
[quote=Anonymous]You can lodge a tax return with a single digital signature (It is called using an Auskey on the Business and/or Tax Agent Portal) so the ATO clearly are OK with it. Try asking the ATO, however, to give you written advice on whether they in fact do. The response is typical bureaucratic nonsense. A sort of “it is obvious that we do but we are not in a position to say whether we do or do not.” Good article my thanks to the author.[/quote]
The ATO creates an “Instrument of Approval” whenever a lodgment needs to be in the ‘approved form’ per s388-50 of the TAA (e.g. an income tax return). An Instrument of Approval includes a section that covers approved electronic signatures under s388-75 TAA. See [url=http://https://www.ato.gov.au/law/view/document?src=rs&pit=99991231235958&arc=false&start=1&pageSize=10&total=46&num=1&docid=PSR%2FPS200520%2FNAT%2FATO%2F00001&dc=false&stype=find&df=2&df=85&df=759&tm=phrase-basic-electronic%20signature]PSLA 2005/20[/url] [i]Signature requirements for approved virtual forms, which are forms which are to be lodged electronically or given by telephone[/i]
PS LA 2005/20 is basically only detailing the signature requirements for approved virtual forms. An approved form can be a virtual return, notice, statement, application or other document in a form approved in writing by the Commissioner. A virtual form is one that does not have a physical existence, being lodged digitally or given by telephone.
Here’s the thing many ATO approved forms are multiple documents in the same form. So take a trust tax return. It may contain the obvious, a document for the tax return but it also may include a family trust election, an interposed entity election, a CGT election and on it goes. These are different documents doing very different things. Applying a single digital signature to this collection of different documents means you are signing multiple documents with a single digital signature. PS LA 2005/20 and the portal establishes the ATO lets you do just that. So, here is the question. Ask the ATO can you digitally sign multiple documents with a single digital signature? The response your will get is, “we are not in a position to say whether we do or do not.”. PS LA 2005/20 is of no help to you other than confirming what the ATO are doing. We are talking about digital signatures here not just the ATO. So, can you digitally sign multiple documents with a single digital signature? I think yes for all sort of reasons, one of them being the ATO seems to be saying, “yes you can.” Ask the ATO, however, to confirm whether PS LA 2005/20 confirms that they agree you can and you will be advised that they are not in a position say whether you can or cannot. This then leads to the type of bureaucratic nonsense I was referring to. Can a tax agent have a client sign a trust return with a single digital/electronic signature? According to the ATO, they have no idea. Can the ATO have a taxpayer sign a trust tax return with a single digital/electronic signature? The answer you will get, as I keep saying is “we are not in a position to say whether we do or do not’, even though it is obvious they do.
Important area that very few accountants/tax agents/SMSF auditors and even the ATO are paying much attention to. The rule of thumb seems to be that everyone ‘assumes’ that they know what the issues are despite the reality that they actually know next to nothing about the principles and laws that drive electronic signatures. If you read Electronic Signatures for B2B Contracts – Evidence from Australia by Srivastava Aashish this presumption of knowledge by a whole range of professionals that do not actually have any is a key conclusion of his research. All this then is not helped by issues such as how far the ETA extend, how various Acts excluded electronic signatures, witnessing electronically and applying single electronic signatures to multiple documents. A good example of all this are ATO tax returns. The Tax Administration Act allows the ATO to combine various documents into a single form, a tax return is such a form. You can lodge a tax return with a single digital signature (It is called using an Auskey on the Business and/or Tax Agent Portal) so the ATO clearly are OK with it. Try asking the ATO, however, to give you written advice on whether they in fact do. The response is typical bureaucratic nonsense. A sort of “it is obvious that we do but we are not in a position to say whether we do or do not.” Good article my thanks to the author.