David Bell and Yash Janakan have analysed the following case heard in the New South Wales Supreme Court about electronic signatures:

Williams Group Australia Pty Ltd v Crocker [2015] NSWSC 1907

Significance

Use of electronic signatures by a person other than the owner of the signature cannot be relied upon as a ratification of a contract unless a clear intention to authorise such a method is evidenced from the actions of the owner of the signature.

Facts

The plaintiff, Williams Group Australia Pty Ltd, a building materials supplier (creditor) had sought to enforce a debt of $889,534.35 owed by a trade debtor, IDH Modular Pty Ltd (debtor) and a guarantee for that debt against the three directors of the debtor (Guarantee). The proceedings against the debtor were stayed after a liquidator was appointed to the debtor. The creditor then obtained summary judgment against two of the directors of the debtor in respect of the Guarantee but the third director, Mr Crocker, succeeded in resisting the supplier's application for summary judgment. The creditor commenced these proceedings against the third director to enforce the Guarantee.

The signature of the third director appeared on the Guarantee but his signature was electronic and it was undisputed that it had not been placed by him. The supplier contended that the third director was still liable under the Guarantee.

Decision

The court dismissed the creditor's claim and held that the Guarantee had not been ratified by the third director.

McCallum J held that the mere failure of the third director to change his password for the electronic signing system did not demonstrate an intention to authorise another person to apply his signature to such documents. There was no other evidence to suggest this intention. The signature used on the Guarantee was not one the third director had previously uploaded suggesting there was no discussion between him and the person who applied the signature to the Guarantee.

Her Honour also noted that those in the position of the creditor cannot simply rely on an assumption that a particular signature belongs to the proper person. The third director had made no 'representation' to the creditor to suggest that another director or some other person was authorised to apply his signature.  Additionally, unlike the bank in Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 where the representational conduct of the institution was the critical consideration, the third director had not presented an 'organisational structure' so as to present to outsiders an appearance that others had authority to sign on his behalf.

The alternative argument that the third director had subsequently ratified the Guarantee was also rejected by her Honour.  In order for him to have ratified the Guarantee, he needed to have known that he personally had been committed and was aware of the terms of the Guarantee.  On the evidence, this was not the case.  Although automatic emails had likely been sent to the third director notifying him that his signature had been used, there was no evidence that he had actually seen or read the emails.