Electronic execution of a deed

While legislation or other instruments have been recently introduced in various jurisdictions to allow for electronic execution of a deed, this article does not deal with this topic. The true impact of these laws and how long they will last are not yet known, and we recommend that, wherever practical, deeds are printed in hard copy for execution with traditional wet signatures.

Traditional formalities

Deeds are intended to be a solemn and binding declaration of a person’s intentions. Traditionally, they require three formalities to be considered valid. That is, that they:

• must be written on paper, parchment, or vellum;
• must be sealed; and
• must be delivered.

Hence the expression “signed, sealed and delivered”. Unless otherwise provided for in legislation, these formalities are still required (Scook v Premier Building Solutions Pty Ltd [2003] WASCA 263 [22]). However, this has been varied by a range of legislation.

Sealing a deed

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).

Legislation has varied this requirement by prescribing methods by which a deed is taken to have been sealed. The position regarding sealing varies significantly between jurisdictions. For example, in NSW, if a deed is expressed to be a deed (e.g. it says “executed as a deed”), it is taken be sealed. In Victoria, the words “signed, sealed and delivered” (or similar) are required.

Delivery of a deed

Case law states that 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). 

This is usually achieved by the words “signed, sealed and delivered”’. However, some states have altered this requirement.

Witnessing a deed

The default position does not require witnesses to a deed. However, the majority of jurisdictions now require a witness who is not a party to the deed. 

Dating of a deed

A deed does not need to be dated in order for it to be valid (Goddard’s Case (1584) 2 Co Rep. 4b).

Companies and deeds

The position for companies wanting to execute a deed is different. This is due to s 127 of the Corporations Act 2001 (Cth).

Section 127 states that a document (including a deed) can be executed if it is signed by two directors or a director and a secretary. Therefore, the above requirements (i.e. sealing, etc) do not apply to companies that execute it this way.

Note that this does not cover a proprietary company with a sole director who is not a secretary. Therefore, it is always best practice to also have a secretary.

What if a document fails to be a deed?

Documents designed to be used in a particular jurisdiction may fail to be a deed in others. This can have serious consequences in the case of SMSFs. 

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). As such, if a document that attempts to vary the governing rules of an SMSF fails to be a deed, then the new governing rules are typically not adopted. This can be disastrous to clients who are relying on an updated set of governing rules that have not actually been adopted. 

Best practice

It is best practice to ensure all the relevant requirements of all jurisdictions are met. This is not an onerous process but does require an adviser to be alert. It is best practice, where an individual signs a deed, to have:

• A witness who is not a party to the deed; and
• The words “executed as a deed” and “signed, sealed and delivered” appear.

It is best practice, where a company signs a deed, for the company to have a secretary and for the words “executed as a deed” to appear.

Ensuring that this “best practice” method is followed will also place clients in the best possible position in relation to the validity of the deed where the matter is litigated in another jurisdiction. This frequently occurs where, for example, a client lived in Victoria though retires and dies in Queensland. The estate may then be litigated in Queensland where legislation imposes different requirements than originally required in Victoria.

By Shaun Backhaus, lawyer, and Bryce Figot, special counsel, DBA Lawyers