By Doug Robertson and Andrew Walker
The rapid spread of COVID-19 and the sudden closure of commercial premises across the UK has prompted a need for clear direction on the use of electronic signatures and the risks and difficulties which can be associated with their use. In addition, there have been reports of solicitors swearing statutory declarations remotely by Skype and this note addresses whether this is safe practice.
Admissibility and Validity of the document
An electronic signature is capable in law of being used to execute a document (including a deed) provided that the person signing the document intends to it and also that any formalities relating to execution of that document are satisfied.
The primary UK legislation on electronic signatures is the Electronic Communications Act 2000 (ECA 2000) and this gives a very wide definition on what may constitute an electronic signature. Furthermore, the courts have always taken a permissive stance on the question of whether an electronic signature is admissible as evidence.
However, the fact that an electronic signature is likely to be admissible to a court does not inevitably mean that it is valid. Concerns arose following comments in Mercury in 2008 that an electronically signed document may not amount to a ‘discrete physical entity’ or the ‘same physical document’ at the moment of signing. Since then there has been some slightly contradictory guidance from the Law Society and the courts. As such, care should be taken that the document which is being executed by the client or other parties is in its final form. In their most recent update of their guidance on the issue, dated 18 June 2020, the Law Society has suggested that if a document is to be virtually executed or use an electronic signature, the below steps should be followed:
- Follow the guidance set out in the Law Society's guidance on execution of documents by virtual means or the execution of a document using an electronic signature as appropriate
- Speak to the solicitors of the other party or parties to the transaction to ensure that there's a clear agreement on how to manage the transaction and execution
- Consider what steps are to be taken to verify the identity and authority of each person beyond what s required by law
- If there's a concern regarding the authenticity of a document or the identity of the signatory, additional and objective sources of identification (such as video or photographic evidence) should be used
- Any evidence supporting the identity of any signatory must be held on the respective file and be readily accessible and reviewable
- Once completion has taken place, confirmation of this should be communicated to all solicitor and/or parties (as appropriate) involved
- Always check the legislative, regulatory and cultural requirements for virtual execution and electronic signatures
Documents which need to be in writing
While a simple contract does not necessarily need to be in writing, in English and Welsh law some documents do need to be made ‘in writing’ or ‘signed’ to be valid.
The Law Commission’s conclusion in 2019 was that the primary requirement for a document to be ‘in writing’ was one of visibility. As such, anything that is intended to be and can be read on screen (such as an email) would satisfy this. With regards to a document being ‘signed’ the test is that the mark which appears in a document must have been inserted in order to give, and with the intention of giving, authenticity to it. An electronic signature ought to satisfy this test.
Practical difficulties with executing deeds electronically
One significant difficulty with executing a deed electronically is that there is often a need for a witness. Two common examples where a witness is required are when a deed is being executed by a single director of a company or when a deed is being executed by an individual. Moreover, currently there is a clear consensus that physical presence is required in order to validly witness the execution of a deed. This means that witnessing cannot be achieved via video-link or other remote methods. HM Land Registry has confirmed as much in the updated edition of their Practice Guide 8: Execution of Deeds (further comments on the updated Practice Guide 8 are below).
Given the current measures regarding social distancing, there is a question about whether an adult relative who lives with the signatory could validly witness the execution of a document. The usual position is that a witness must be an independent third party, that they are not a party to the document, that they do not benefit from the subject matter of the document being executed and there is no conflict of interest arising from them witnessing the execution of the document. Having an adult relative who lives with the signatory witness the execution of a document is not ideal and, if the adult relative acts as the witness on a document, there is a risk that the impartiality and validity of the witnessing of the document could be called into question. As each situation is different, we would strongly recommend that advice is sought on the course of action of any proposed execution and witnessing of a document.
Based on the above, for HM Land Registry’s requirements at the very least, it is not possible to remotely witness a deed. At the moment this gives rise to clear difficulties because the witness needs to see the signatory executing the deed (although HM Land Registry’s guidance suggests this might be through glass e.g. a house or car window). Furthermore, Mercury could also be interpreted to effectively require the witness to make their signature on the same version of the document being electronically signed and before it was freshly saved or uploaded. Practically, this looks unrealistic and could also raise questions regarding the deed’s authenticity.
Due to concerns around due execution, evidential issues and the potential for fraud, prior to the Covid-19 pandemic the electronic execution of deeds was generally not advisable. In the current climate, it may prove necessary to execute deeds electronically depending upon the commercial circumstances using a reliable electronic signing platform. However, we would suggest that extreme caution is exercised in respect of the electronic execution of documents and great care must still be taken to ensure that all of the statutory requirements for execution are still met.
Section 7 of the ECA 2000 provides that, in any legal proceedings, an electronic signature incorporated into a particular electronic communication shall be admissible in evidence in relation to any question as to the authenticity of that communication or as to the integrity of that communication. The present position is that the electronic signature will be considered as prima facie authentic unless evidence is put forward to call this into question. The party claiming that the signature was not authentic would need to prove this on the balance of probabilities.
HM Land Registry
HM Land Registry have issued revised instructions on the point of electronic signatures in the light of the Coronavirus outbreak, primarily in their Practice Guide 8: Execution of Deeds. They have advised that, provided a strict process (known as ‘Option 1’ as a result of its categorisation as this by the Law Commission in its’ September 2019 report entitled “Electronic Execution of Documents”) is followed, HM Land Registry will accept Mercury-style documents. This change to HM Land Registry’s previous guidance only applies to a deed effecting a disposition, such as a transfer, charge, easement or lease. It will also apply to discharges of charges and powers of attorney, other than a lasting power of attorney. Certain other documents, such as consents, may still need to be in wet ink original form before they can be accepted and registered.
HM Land Registry require that each party to a transaction must agree to follow ‘Option 1’ before it can be used and the resulting document be accepted by HM Land Registry. It is important to note that ‘Option 1’ involves the creation of an underlying “wet-ink” signature. HM Land Registry is not sanctioning the use of other forms of e-signature for dispositions (e.g. the use of Adobe signature tools or cloud-based document signing platforms such as DocuSign).
The steps of ‘Option1’ are set out in HM Land Registry’s Practice Guide 8: Execution of Deeds:
- Final agreed copies of the transfer are emailed to each party by their conveyancer.
- Each party prints the signature page only.
- Each party signs the signature page in the physical presence of a witness.
- The witness signs the signature page.
- Each party sends a single email to their conveyancer to which are attached the final agreed copy of the transfer (reference to Step 1 above) and a PDF/JPEG or other suitable copy of the signed signature page.
- The conveyancing transaction is completed.
- The conveyancer applies to register the disposition and includes with the application the final agreed copy of the transfer and the signed signature page or pages in the form of a single document.
- The application is processed by HM Land Registry following standard operating procedure.
As noted above, the requirement for the physical witnessing of the execution of deeds remains and the position adopted by HM Land Registry reinforces this.
The Justice Secretary, in response to the Law Commission's recent report in this area, has suggested that the government may look to review the law of deeds in the future. However, there currently appears to be no such review and there doesn't appear to be a confirmation of when this review will take place.
Further advice on these points can be provided if necessary.
Remote swearing of Statutory Declarations
We have considered two principal issues on this point which are (1) the witnessing of the swearing; and (2) the mechanics and timing of the payment. The Law Society have previously stated that it remains the convention for there to be physical presence rather than virtual. The courts have also attempted to provide a work-around for remote swearing of statutory declarations.
Witnessing the swear
The thrust of this problem is very similar to the problem of witnessing the execution of a deed. The concern remains that, without a physical presence, it is very difficult (and may be impossible) for the individual witnessing the swear to be certain that it has been carried out correctly. This would potentially undercut the essential purpose behind the making of the statutory declaration. There is also the same danger deriving from Mercury which is that a court deems that the person witnessing the swear has not actually signed the same version of the statutory declaration.
In a previous version of this note, we considered that a potential solution may be for the statutory declaration to be signed live by video call and then to be immediately sent to the witness for an electronic or wet ink signature. A note stating that the statutory declaration had been sworn remotely could mitigate against the risk of misleading third parties.
From an insolvency perspective, the Temporary Insolvency Practice Direction (“TIPD”) provides a mechanism by which a statutory declaration can be sworn remotely and provides that “…where a statutory declaration is made in the manner described…then the defect or irregularity…arising solely from the failure to make the statutory declaration in person…shall not by itself be regarded as causing substantial injustice…”. However, TIPD does not amend the requirements for statutory declarations provided in primary (e.g. the Statutory Declarations Act 1835 (the “Act”)) or secondary (e.g. the Insolvency (England and Wales) Rules 2016) legislation and therefore an attempted remote swearing of a statutory declaration (even if it is in accordance with TIPD) may still be an irregularity that requires ‘curing’ by the courts.
We can't say for certain that the above will constitute a valid swear. Use of the strategy still carries the risk that it won't be deemed to be a valid swear. One of the further risks of proceeding with a TIPD sworn statutory declaration is that whilst the person making the statutory declaration (the "Declarant") may be of the view that the swear is valid, an objection can still be made on the basis that there has been a substantial injustice caused by the action taken and the court will then be required to adjudicate on this, which may slow down the process for which the statutory declaration was required (for example, on a Notice of Intention to Appoint Administrators where the moratorium is required)
In addition, the Law Society has published the LexisNexis Protocol for Virtual Statutory Declarations (“LNP”) on 18 May 2020, suggesting that the Law Society approves of the proposed courses of action set out in the LNP. The LNP suggests that one option (defined as ‘Option one’ in the LNP) for remote swearing of statutory declarations would be:
- To arrange a call via a video conferencing system and that at the start of the call the parties confirm their identities
- The Declarant signs the declaration whilst on the video call and the Declarant makes the declaration verbally, in accordance with the prescribed wording to be amended to reflect how the declaration has been administered and confirms, as part of the verbal declaration, how the declaration has been made (e.g. by video conference)
- The Declarant emails an electronic copy of the signed declaration to the witnessing solicitor, who prints the document and completes the section(s) that they need to complete and inserts the location of the declaration as via the video conferencing system used
- The witnessing solicitor then emails the completed document to the Declarant.
The alternative option proposed in the LNP (defined as ‘Option two’ in the LNP) for remote swearing of statutory declarations is:
- The Declarant signs the declaration and emails a copy to the witnessing solicitor
- The witnessing solicitor prints the signed declaration and then calls the Declarant using a video conferencing system and the parties confirm their identities at the start of the call
- The Declarant makes the declaration verbally, in accordance with the prescribed wording to be amended to reflect how the declaration has been administered and confirms, as part of the verbal declaration, how the declaration has been made (e.g. by video conference)
- The witnessing solicitor completes the section(s) that they need to complete and inserts the location of the declaration as via the video conferencing system used
- The witnessing solicitor then emails the completed document to the Declarant.
We cannot say for certain that the above will constitute a valid swear. Use of the options set out in the LNP still carry the risk that, a swear dealt with using either of these options, will not be deemed to be a valid swear.
Whilst the LNP refers to the position taken by Companies House in respect of Companies House’s willingness to accept statements of solvency with a statutory declaration sworn via a video conferencing facility, this does not ‘cure’ any potential defect in the statutory declaration itself and the position adopted by Companies House does not change the law regarding statutory declarations.
In any event, it would be necessary to take advice in each situation where a statutory declaration has to be made.
It is important to note that the TIPD and the LexisNexis Protocol for Virtual Statutory Declarations published by the Law Society on 18 May 2020 do not change the law regarding statutory declarations, does not deal with the position taken by other bodies (such as HM Land Registry) and must therefore be approached with caution.
Payment for the swear
The problem in this respect arises from the legislation which governs the process, namely, section 19 of the Act. The Act prescribes that the fee for making the declaration is “due and payable upon making and subscribing such declaration”. Taken at its face value, this makes remote swearing potentially difficult to achieve because it could be hard to make the payment at the same time with the making of the declaration.
One potential solution to this problem is for the solicitor to acknowledge to the Declarant that the Declarant is indebted to the solicitor witnessing the swear for the sum of the swear fee,- thereby creating a consideration upon the making of the swear. An alternative might be for the fee to be sent to the attesting solicitor and then for the swear to take place after the money has arrived and for the Declarant to confirm on making the swear that payment is released. The difficulty in both of these cases is that they may not comply with the literal interpretation of the Act however as payment has been made there is at least an argument it is valid. These approaches appear to have found some favour with the Law Society, given its publishing of the LNP, which refers to these two potential courses of action for dealing with payment of the fee for the swear.
It is important to note that the LexisNexis Protocol for Virtual Statutory Declarations published by the Law Society on 18 May 2020 does not change the law regarding statutory declarations, does not deal with the position taken by other bodies (such as HM Land Registry) and must therefore be approached with caution.
Other potential solutions
It may be still be possible to swear a statutory declaration in certain limited circumstances. For example, if the person swearing the declaration happens to co-habit with another independent lawyer or has a friendly lawyer neighbour, then it is possible to make the statutory declaration. It will be important that the lawyer in front of whom the statutory declaration is made is entirely independent of the transaction and works for a different firm from the firms representing the parties. Caution is advised but this may offer a possible solution in some circumstances.
In some cases, statute may provide for “simple declarations” or “statements of truth” as an alternative to statutory declarations. These may provide an alternative, for example in connection with adverse possession claims or “contracting out” of the Landlord and Tenant Act 1954.
This note does not consider the process, issues and risks of virtual completions. If you require advice or guidance on virtual completions please do not hesitate to contact us.
Please note this article is provided for information purposes only and does not constitute legal advice and as such it cannot be relied upon. All matters will have their own specific facts and if you do require further advice on a specific matter then please do not hesitate to ask one of our experts. Irwin Mitchell LLP cannot be held liable for the contents of this article and you should be aware that the law changes regularly.