In the recent case of Neocleous -v- Rees, an email with an automatically generated signature was considered sufficient for the purposes of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 to bind the parties to an agreement for the transfer of land in settlement of a right of way dispute.

Background

The case concerned a right of way dispute, where part of the defendant’s land was only accessible via the claimant’s land. Whilst the benefit of the right of way appeared on the defendant’s title, the burden was not registered against the claimant’s title and so the defendant applied to the Land Registry to register the right of way against the claimant’s title.

The claimant sought to challenge that application and the matter was referred to the First Tier Tribunal. However, shortly before the final hearing in March 2018, settlement discussions took place between the claimant and defendant’s respective solicitors and it was in respect of those settlement discussions that the issue before the court arose.

Various email correspondence exchanged by the parties’ respective solicitors set out the terms of a settlement agreement reached by the parties in advance of the final hearing. Effectively, the claimants had agreed to purchase the land concerned in exchange for the sum of £175,000 and in full and final settlement of the application to the First Tier Tribunal and other claims. Following an exchange of emails on 9 and 12 March where the terms of the settlement were set out and confirmed, the hearing was vacated.

However, in May 2018, the defendant’s solicitor wrote to the Tribunal to request that the matter be relisted on the basis that the terms of the settlement had not been finalised and the defendant wished for the hearing to go ahead. The claimant contended that the emails amounted to a binding contract of compromise and consequently issued an application to the County Court for specific performance of the settlement agreement.

Section 2

The parties agreed that since the matter concerned the transfer of land, the formalities as set out in section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 must be satisfied to form a binding contract:

(1) a contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all of the terms which the parties have expressly agreed in one document, or where contracts are exchanged, in each.

(2) the documents incorporating the terms, or where contracts are exchanged, one of the documents incorporating them (but not necessarily the same one) must be signed by or on behalf of each party to the contract.

The claimants contended that the email exchanges amounted to a single document which was signed by or on behalf of each party and therefore the formalities were met.

The defendant did not agree there was an enforceable contract under the 1989 Act for the following reasons:

(1) there was no contractual intention at the time of the email exchange;

(2) the email exchange did not comply with section 2(1) in that it failed to incorporate all of the terms; and

(3) in any event, the agreement did not comply with section 2(3) in that it was not signed by both parties.

At trial, the defendant conceded points 1 and 2, leaving the only issue to be decided by the judge being whether the signature requirements of section 2(3) of the 1989 Act had been met.

The trial

The defendant’s solicitor’s email of 9 March, in which the terms of the settlement were set out, was not marked ‘subject to contract’ and ended with ‘many thanks’ followed by the defendant’s solicitor’s name, job title and company address in the form of an automatically generated email signature. In evidence, the defendant’s solicitor admitted that the inclusion of ‘many thanks’ above the automatically generated email signature was giving his authority to the email and that he had his client’s authority to settle the dispute on those terms.

Whilst the defendant sought to rely on the approach taken in Firstpost Homes Limited -v- Johnson (1995), which provided that a signature should be handwritten, the judge noted that this must be considered in the context of what an ordinary person believed the word ‘signed’ to mean and that the interpretation of section 2 of the 1989 Act should not be encumbered by ‘ancient baggage’. The judge preferred the claimant’s reliance on HHJ Pelling QC’s decision in the case of Pereira Fernandes SA -v- Mehta (2016), who said:

‘It seems to me that a party can sign a document for the purpose of section 4 (of Statute of Frauds) by using his full name or his last name prefixed by some or all of his initials or using his initials and possibly by using a pseudonym or a combination of letters and numbers…providing always that whatever was used was inserted into the document in order to give and with the intention of giving, authenticity to it. Its inclusion must have been intended as a signature or these purposes….I have no doubt that if a party creates and sends an electronically created document that he will be treated as having signed it….the fact that a document is created electronically as opposed to hard copy makes no difference…if a party’s agent sending an email types his or her or his or her principal’s name to the extent permitted by existing case law in the body of an email, then in my view that would be sufficient…’.

In the case of Re Stealth Construction Limited (2012), the insertion of a signature at the end of an email was sufficient to render the document ‘signed’ for the purpose of section 2 of the 1989 Act.

In addition to the cases referred to above, the claimant pointed to the academic criticism of Firstpost, which was also acknowledged in the Law Commission’s consultation paper no.237 titled ‘Electronic Execution of Documents’. The consultation paper also considered various other authorities as well as the Signatures Directive 1999/93/EC, domestic legislation in the form of the Electronic Communications Act 2000 and the Electronic Identification, Authentication and Trust Services Regulation 910/2014. All of these seek to give electronic signatures similar effect to a handwritten signature.

The judge in this case held that including ‘many thanks’ whilst knowing that a computer programme (in this case Microsoft Outlook) would automatically generate the sender’s name after those words is a clear indication of an intention to authenticate. He therefore held that the automatic email sign-off was sufficient for the purpose of section 2(3) of the 1989 Act and that the claimant was entitled to specific performance of the settlement agreement as set out in the emails.

The case follows the recent Law Commission report No.386 on the electronic execution of documents published on 4 September 2019. The report sets out some high level conclusions as to the law regarding the validity of electronic signatures. Amongst others, the Law Commission report states that an electronic signature is capable in law of being used to execute a document (including a deed) if the person signing it intends to authenticate the document and any formalities relating to the execution of that document are satisfied. The Law Commission report acknowledged that such requirements are yet to be considered by the courts and so the case of Neocleous -v- Rees provides some useful guidance in the context of property transactions.

Practical considerations

This case is of particular relevance in an increasingly digital age where emails are the most common means of correspondence and where there is an increasing focus on the use of electronic documentation.

Whilst Neocleous -v- Rees concerns specific facts, it encourages practitioners to consider whether emails should be marked ‘subject to contract’ if they are not intending to be binding, or whether disclaimers should be used to advise recipients that automatically generated email sign offs should not be interpreted as an intention to authenticate the contents of the emails. However, this is not always appropriate, especially in professional services.

Consideration must also be given to email hacking and security issues which alert practitioners to the fact that not all emails are authentic. Whilst the law in this area continues to develop, practitioners must be aware of the issues and have a good understanding of their email systems and policies.