Recent Decision – Williams Group Australia Pty Ltd (Williams) v Crocker
A recent decision of the NSW Court of Appeal highlights a risk associated with electronic signatures.
The case name is Williams Group Australia Pty Ltd (Williams) v Crocker and the decision was handed down on the 22nd of September (2016).
This case was about the enforcement of a personal guarantee alleged to have been provided to a trade creditor and executed by use of the electronic signature of a company director. The respective signatures had been affixed to the guarantee documents (which formed part of a trade credit agreement) using the “HelloFax” system, by which users can upload their signature and electronically apply it to documents. Mr Crocker, a director of IDH Modular Pty Ltd (IDH), had been provided with a username and password by one of his co-directors to enable him to access the HelloFax system. He did not change the password during the relevant period, with the result that anyone who had these login details would be able to affix Mr Crocker’s electronic signature to documents.
Pursuant to the trade credit agreement, Williams supplied building materials to IDH during 2012 until May 2013, by which time IDH’s debt stood at $889,534.35.
In October 2013, IDH went into liquidation and proceedings commenced against it were automatically stayed. Thereafter Williams pursued the directors relying on the guarantees.
Mr Crocker maintained that his signature had been affixed to the guarantee by an “unknown person” without his knowledge or authority. This was accepted by the court.
Taking risks is part and parcel of being in business… the issue is how do I minimise the risk of a signature (electronic or otherwise) not being authentic… or not being able to prove that it is authentic.
Your options range from:
only accepting signatures witnessed by a justice of the peace or lawyer who certifies as to the identity of the signatory which signature and certification is on a hard copy original document;
to accepting an electronic signature on a document with no other check.
However, the aim should be to have in your possession as much evidence as is practicable, to support the view that the signature is authentic.
If the amount at risk is $800,000 as in the IDH case, I’d opt for the first option above… if it were $8,000, I may accept an electronic signature with a follow email to the signatory’s usual email address confirming the agreement and attaching a copy of the executed agreement… and keep a soft and hard copy of the email. In the absence of a response from the recipient reasonably soon thereafter declaring… “I didn’t sign that”, you should be on solid ground.
Keeping a “paper trail” remains an effective risk management tool.
Risk Assessment Briefing
If you are concerned about identifying and minimising risks in your business, contact our Business Law Team to find out about our Risk Assessment Briefing. The Briefing involves one of our risk management lawyers visiting your business premises to highlight any risks that could impact your business. Once identified, the lawyer will discuss those risks and offer a range of risk minimisation options. This Briefing will lay the foundation for you to be able to develop, implement and monitor a Risk Management Plan for your business.