One of the topics that feature regularly on this blog is cyber security. It is such an important issue that it could be a daily topic in itself. Before I move on to the key issue around the danger that electronic signatures pose, I mention a couple of interesting articles I read recently.
First while the Ashley Madison cyber breach happened several years ago now, it has resurfaced with hackers writing to subscribers to the service stating that they will disclose details of their activities on the dating site with the persons spouse and friends. Several suicides have followed while others are paying the circa $1,200 payment requested. The trouble with this is when does it stop. If you pay once, how often will they come back to the well and will the amount asked for increase.
The second one is that the details of 30,000,000 credit cards is currently being offered for sale on the net.by Joker's Stash. The good news for us is that most of the customers were American but 1,000,000 were non US based clients. The breach occured at WAWA.
With all the legislation, potential penalties, litigation and brand damage this sort of thing can create, you have to question why any business would keep non essential personal information such as copies of drivers licences, and credit card details on file.
If you have not read the yet read the decision in the matter of Bendigo and Adelaide Bank Limited v Pickard [2019] SASC 123 points out the dangers of electronic signatures prepared by Cooper Grace Ward and published in Lexisnexis on 28 January 2020.
It has become increasingly common for documents to be signed electronically. This can be a very convenient way of signing and storing documents.
However, there are more and more cases where electronic signatures are being challenged, and documents being considered unenforceable as a result.
The issues are well demonstrated in a recent case of Bendigo and Adelaide Bank Limited v Pickard [2019] SASC 123.
The facts
The Pickards, through a family trust, subscribed for interests in Great Southern Group investments, and borrowed through Bendigo and Adelaide Bank.
The Pickards were required to guarantee the borrowings.
The loan agreement and guarantee were signed on behalf of the Pickards and their family trust by Great Southern Finance Pty Ltd under a power of attorney.
The directors of Great Southern Finance Pty Ltd signed the loan agreement and the guarantee electronically. The evidence was that the company’s practice for document signing was that administrative staff, not the directors, physically affixed the signatures. The directors could not prove they authorised the administrative staff to physically affix the signatures on their behalf.
The decision
The Court decided that, as the directors of Great Southern Finance Pty Ltd could not prove they had authorised the signatures to be placed on the documents, they had not been properly signed, and therefore the guarantees could not be enforced against the Pickards.
The importance of systems and records
This case illustrates the risks with electronic signatures, and the importance of having systems in place to prove the person actually authorised the signing of the document electronically.
If important documents are being signed electronically, then records should be kept to show that the people signing were the ones who affixed the signatures, or the documents might be unenforceable and ineffective.
If contract risk was not a minefield already! Hopefully this will help protect you.