A note about electronic signatures

In a time when greater use of electronic documents is common, care needs to be taken when accepting a document with an electronic signature. The use of email and electronically generated documents is convenient. But what happens if the person whose signature appears on a document disputes that he/she signed it or intended to sign it?

The New South Wales Court of Appeal recently considered whether a director of a company could be liable under a guarantee where his signature was affixed to the guarantee electronically without the director’s consent or knowledge.

Facts

The Respondent was a director of a company who obtained credit from the Appellant. The Appellant sued the Respondent for money owed based on a guarantee that bore the Respondent’s electronic signature. The Respondent’s defence was that his electronic signature was placed on the guarantee without his consent.

The Respondent was given a username and password to access the “HelloFax” system and affix his signature electronically to documents. The Respondent did not change his password, resulting in anyone with knowledge of the password being able to access the system and electronically affix the Respondent’s signature to documents. The signature affixed to the guarantee was not one of the two signatures uploaded to the “HelloFax” system by the Respondent.

Judgement

The Respondent’s defence was upheld in the Court below – there was no actual or ostensible authority for his signature to be affixed to the guarantee by another person.

On appeal, it was held that the Respondent’s failure to change his password did not amount to a representation that the affixing of his signature to the guarantee was authorised. On the facts, there was no evidence that the Respondent gave authority for his signature to be affixed to the guarantee, or that he was aware that his signature had been affixed to the guarantee.

The fact that the company had placed orders with the Appellant did not amount to ratification of the unauthorised affixing of his signature to the guarantee by the Respondent. The Respondent was unaware that his signature had been affixed to the guarantee until proceedings were commenced against him.

Comment

A document with an electronic signature cannot be accepted at face value. If you receive documents with an electronic signature, especially credit applications or guarantees, then you will need to make enquiries about what systems and procedures have been put in place by the other party to ensure the signature has been affixed with the authority of the signatory. You should also make enquiries to confirm that the signatory is aware of and consented to his signature being affixed to the document.

[1] Williams Group Australia Pty Ltd v Crocker [2016] NSWCA 265.