Esignatures – Convenient, but Beware of the Risks When Applying to Extend Caveats in the Face of Allegations of Fraud!

Key takeaways

• Recent Western Australian cases indicate that the Court will have regard to compliance with the relevant provisions of the Electronic Transactions Act 2011 (WA) when asked to extend caveats that rely on charging clauses in electronically signed agreements where the signatory denies signing the agreement through the digital signing platform.
• Creditors should exercise caution when using, accepting and relying on electronic signatures to sign up customers to credit agreements, particularly when they include charging clauses and personal guarantees.
• Even if you use digital signing platforms to manage electronic agreements, it is prudent to take additional steps to verify the identity and consent of signatories to agreements including:

1. Verification of signature: ensure that you have evidence showing how the electronic signature had been obtained, including details of the email address to which the document was sent and what steps were taken to verify the signatory’s identity.
2. Evidence of email receipt: ensure that you download and retain  verification records from electronic signature platforms used including the IP address of the signatory as proof that the signatory had access to and used the relevant email address.
3. Consent: Ensure that the signatory consented to signing documents electronically via Docusign. This is best done by phone.

Facts

In both Bizcap Au Pty Ltd v Sharma¹ (Sharma) and Prospa Advance Pty Ltd v Tasou² (Tasou), creditors sought to extend the operation of a caveat pursuant to s138C of the Transfer of Land Act 1893 (WA) by relying on a charging clause in a loan agreement that had been electronically signed through Docusign in circumstances where the signatory denied signing the agreements. 

In Sharma, the respondent denied that she had ever used the email address recorded in the agreement and denied signing the agreement. Similarly, in Tasou, the defendant argued that the signature on the agreement was not hers and that she had never received any emails from Docusign containing the agreement for execution.  

Judgments

In both instances, the Court did not extend the caveats and dismissed the creditor’s applications to extend their caveat as there was insufficient evidence to show that the agreement containing the charging clause was actually signed by the signatory via Docusign.

In arriving at its decision, the Court in both Sharma and Tasou considered the relevant provisions of the Electronic Transactions Act 2011 (WA) (Electronic Transactions Act) which sets out the requirements for a valid electronic signature under the laws of Western Australia.

Section 10 of the Electronic Transactions Act, provides that:

(1) If, under a law of this jurisdiction, the signature of a person is required, that requirement is taken to have been met in relation to an electronic communication if —

(a) a method is used to identify the person and to indicate the person's intention in respect of the information communicated; and

(b) the method used was either —

(i) as reliable as appropriate for the purpose for which the electronic communication was generated or communicated, in the light of all the circumstances, including any relevant agreement; or

(ii) proven in fact to have fulfilled the functions described in paragraph (a), by itself or together with further evidence;

and

(c) (c) the person to whom the signature is required to be given consents to that requirement being met by the use of the method mentioned in paragraph (a).

…

(3) The reference in subsection (1) to a law that requires a signature includes a reference to a law that provides consequences for the absence of a signature.

In particular, in Sharma Hill J observed that ‘the applicant has not adduced any evidence as to the method it used to identify the first respondent, or the matters on which it relies as being the indications that the first respondent intended to sign the guarantee’³ and that ‘some steps should have been taken by the applicant to verify that the first respondent's electronic signature was applied with her consent'.⁴

Similarly,  in Tasou Whitby J adopted the reasoning of Hill J in Sharma and observed that: 

the plaintiff has not adduced any other evidence to support the contention that the first defendant signed the Agreement, such as evidence as to what email address the Agreement was sent to, on what basis the plaintiff says the first defendant had access to that email address, or the steps that the plaintiff took, if any, to verify that the first defendant consented to the application of her electronic signature to the Agreement.⁵ 

The Court in Tasou likewise dismissed the application to extend the caveat as ‘there is insufficient evidence to demonstrate that the plaintiff's claim that the first defendant entered into the Agreement, that is that she signed the Agreement, has, or may have substance'.⁶

Implications

The line of recent cases, particularly in the Supreme Court of Western Australia, serves as a timely reminder to suppliers that use electronic signing platforms of the importance of complying with the identification and verification requirements of the Electronic Transactions Act in your State. These cases demonstrate that a failure to do so could come at the cost of your security. In today’s fast-paced digital world where technology is constantly evolving, due diligence remains crucial and the importance of taking the time to get to know and verify your customer is still paramount. The importance of picking up the phone and verifying the person that you are dealing with cannot be overstated.

¹ [2024] WASC 198.
² [2024] WASC 359.
³ [2024] WASC 198 at [40]. 
⁴ [2024] WASC 198 at [41].
⁵ [2024] WASC 359 at [22].
⁶ [2024] WASC 359 at [25].