Historically, deeds were required to be written on paper (or parchment or vellum), as well as being signed, sealed and delivered.
Recently, however, there have been numerous legislative developments that allow for deeds to be executed electronically, subject to certain requirements. These requirements differ depending on the Australian state/territory’s laws the deed is subject to. While electronic execution has its attraction, there are still issues that need to be considered.
This article supplements a previous article entitled ‘Six simple rules to execute a deed that satisfies ALL Australian jurisdictions’.
Summary: ‘Six simple rules to execute a deed that satisfies ALL Australian jurisdictions
As discussed in that article, the following rules should be followed to ensure that a deed will be valid in all jurisdictions:
Rule 1: Don’t try to execute a deed electronically.
Rule 2: Ensure the deed says ‘executed as a deed’ and ‘signed, sealed and delivered.’
Rule 3: Ensure that each individual executing the deed has an adult independent witness.
Rule 4: When printing a PDF before signing, print the ENTIRE document.
Rule 5: Put the date on the deed.
Rule 6: Keep the full original deed.
Can a deed be made electronically?
The short answer is no. However, of course, there is a longer answer.
The longer answer depends on several factors. On one hand, s 110A of the Corporations Act 2001 (Cth) allows for companies to execute documents (including deeds) electronically. Furthermore, the company’s constitution should have express powers allowing deeds and other documents to be signed electronically.
On the other hand, when individuals are signing deeds, it matters which jurisdiction’s laws they are subject to. All jurisdictions have different governing legislation that may or may not allow for electronic execution. For example, deeds can be signed (and where applicable — witnessed) electronically in NSW, Queensland and Victoria but not in any other jurisdiction.
Even where legislation does purportedly allow for electronic execution, there are still uncertainties that should not be overlooked. On first blush, the Victorian Electronic Transactions (Victoria) Act 2000 (Vic) (Victorian ETA) allows for a deed to be signed electronically. However, on closer inspection, there is some nuance to how this legislation operates. For example, s 9 of the Victorian ETA requires that the electronic method used was ‘as reliable as appropriate’. It can be unclear at times as to what constitutes ‘as reliable as appropriate’. Thus, the conservative approach is to have all deeds executed via the traditional ‘wet ink’ method.
See the table below for each jurisdiction’s requirements for deeds to be executed by individuals.
Deeds should be signed, sealed and delivered
Under common law, sealed and delivered documents were deemed more reliable and thus given greater protection. In recent times, legislation has supplemented the common law.
Sealed
Sealing means affixing a wax or wafer seal, a rubber stamp or any other impression as a seal (Electronic Rentals Pty Ltd v Anderson (1971) 124 CLR 27 [18]).
Broadly, the act of sealing a deed is no longer required. Instead, each jurisdiction has its own criteria as to what will constitute a deed to be ‘sealed’. For example, in Victoria, if a deed is expressed to be sealed (eg, the deed says ‘signed sealed and delivered), it is taken to be sealed.
Some deed suppliers do not use appropriate wording, eg, ‘signed, sealed and delivered’, when an individual executes a deed. In jurisdictions such as Victoria, failure to use such wording can result in the document failing to be a deed.
Delivered
Delivery means some conduct indicating that the person who has executed the deed intends to be bound by it (Monarch Petroleum v Citco Petroleum [1986] WAR 310, 355). Typically, this is evidenced by having the words ‘signed sealed and delivered’. However, this varies between jurisdictions, eg, in South Australia, s 41(3) of the Law of Property Act 1936 (SA) states that delivery is not necessary for the execution of a deed.
Witnessing
Only Victoria and Queensland do not have a witnessing requirement when a deed is executed. For the remaining jurisdictions, each witness should be at least 18 years old and not be a party to the deed.
Why you can never know which jurisdiction will apply (therefore do something that satisfies every jurisdiction)
It is difficult to say with precision which jurisdiction’s laws might ultimately govern an SMSF.
For example, in one case, a deed provided that the SMSF would be subject to the laws and courts of the jurisdiction where the deed was executed. The deed was executed in Queensland. However, the relevant member’s executor lived in South Australia. The SMSF became subject to the South Australian court system.
These issues become more complex with electronic execution, especially where the witnesses are in different jurisdictions.
Impacts on the Superannuation Industry (Supervision) Act 1993 (Cth) (SISA)
There are arguments that under the Electronic Transaction Act 1999 (Cth) (Commonwealth ETA) deeds can be executed electronically. However, schedule 1 of the Electronic Transactions Regulations 2020 (Cth), broadly outlines that the Commonwealth ETA does not apply to the SISA. While it may be possible to execute superannuation documents electronically in accordance with certain jurisdictions, there are some legal uncertainties.
Thus, the best practice continues to be executing a deed via the traditional ‘wet ink’ method.
What if a document fails to be a deed?
If a document is not properly executed, then it might fail to be a deed. Unless the original deed provides otherwise, the default position is that only a deed can vary another deed (ING Funds Management Ltd v ANZ Nominees Ltd [2009] NSWSC 243 [72]–[74]).
SMSFs often have multiple amending deeds in their document trail. Therefore, it is crucial to ensure each deed is validly executed.
Summary table of deed execution by individuals
Jurisdiction | Sealing | Delivery | Witnessing | Can witness be party to the deed? | Electronic execution/ witnessing? |
---|---|---|---|---|---|
ACT | Yes, so long as it is expressed to be a deed or to be sealed and is signed and witnessed properly, it is taken to be sealed (Civil Law (Property) Act 2006 (ACT) s 219(3)) | Yes | Yes (s 219(1)(b)) | No (s 219(1)(b)) | No |
NSW | Yes, so long as it is expressed to be a deed or to be sealed and is signed and witnessed properly, it is taken to be sealed (Conveyancing Act 1919 (NSW) s 38(3)) | Yes | Yes (s 38(1)) | No (s 38(1)) | Yes (s 38A) |
NT | Yes, so long as it is expressed to be a deed or to be sealed and is signed and witnessed properly, it is taken to be sealed (Law of Property Act 2000 (NT) s 47(2)) | Yes | yes (s 47(2)) | No (s 47(2)) | No |
QLD | No, (Property Law Act 1974 (Qld) s 46C(2)(c)) | Yes | No (s 46E(2)) | N/A | Yes (s 46D) |
SA | Yes, so long as it is expressed to be sealed, it is taken to be sealed (Law of Property Act 1936 (SA) s 41(5)(b)) | No (s 41(3)) | Yes (s 41(2)) | No (s 41(2)) | No |
TAS | Yes, so long as it is expressed to be sealed, it is taken to be sealed (Conveyancing and Law of Property Act 1884 (Tas) s 63(5)) | No (s 63(3)) | Yes (s 63(2)) | No (s 63(2)) | No |
WA | No (Property Law Act 1969 (WA) s 9(2)) | No (s 9(3)) | Yes (s 9(1)(b)) | No (s 9(1)(b)) | No |
VIC | Yes, but so long as it is expressed to sealed, it is taken to be sealed (Property Law Act 1958 (Vic) s 73A) | Yes | No | N/A | Yes (s 12A) a Electronic transaction (Victoria) Act 2000 (Vic) |
Conclusions
A deed is a critical document. Electronic execution may appear convenient and therefore attractive. However, ultimately, what matters is having a ‘robust’ and ‘solid’ deed that your clients can have supreme confidence in whatever the future of the SMSF may be. The ‘six simple rules’ listed above are currently the best practical way to achieve that confidence.
Related articles
- Six simple rules to execute a deed that satisfies ALL Australian jurisdictions
- Can companies sign or execute a deed electronically? — Part 1
- Electronic execution of deeds by individuals
- Guide for electronic execution
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This article is for general information only and should not be relied upon without first seeking advice from an appropriately qualified professional. The above does not constitute financial product advice. Financial product advice can only be obtained from a licensed financial adviser under the Corporations Act 2001 (Cth).
Note: DBA Lawyers presents monthly online SMSF training. For more details or to register, visit www.dbanetwork.com.au or call 03 9092 9400.
For more information regarding how DBA Lawyers can assist in your SMSF practice, visit www.dbalawyers.com.au.
By Daniel Butler ([email protected]) Director, Bryce Figot ([email protected]) Special Counsel and Nick Walker ([email protected]) Lawyer, DBA Lawyers.
DBA LAWYERS
29 July 2024