By Frank Gambera*

The recent New South Wales Supreme Court of Appeal decision in Williams Group Australia Pty Ltd v Crocker [2016] NSWCA 265 ('Williams v Crocker') highlights the pitfalls of electronic signatures while also serving as a reminder to users of modern electronic commerce that the validity of an electronic signature should not be assumed without adequate confirmation.

The Facts
The case concerns the enforcement of a guarantee given by Mr Crocker, a company director, to secure the supply of building materials from Williams Group Australia Pty Ltd (Williams), under a credit application.

The credit application included the electronically affixed signatures of the three company directors, Mr Crocker being one. The credit application was accompanied by an 'all-moneys guarantee' which also bore the signatures of the three directors in their capacity as guarantors.

The directors' signatures were affixed to both the credit application and accompanying guarantee document electronically by way of a computer program which allows users to upload digital signatures and later apply the signature to documents.
In accordance with the credit arrangement, Williams supplied building materials to the company. By May 2013, the company's debt stood at $889,534.35 and by which time Williams sued the company to recover the debt and enforce the guarantee. In October 2013, the company was placed in liquidation.

Mr Crocker challenged Williams' claim, denying liability and claiming instead that he had no knowledge of his signature having been affixed to the guarantee.

The Decision
On appeal, Williams challenged the lower court's finding in favour of Mr Crocker. Williams argued, among other things, that Mr Crocker was bound by the guarantee by reason of –

1. Ostensible authority – Mr Crocker had authorised another person to affix his signature electronically;
2. Ratification – Mr Crocker knew of the terms of the credit application and accompanying guarantee, and that he shut his eyes to the obvious.
3. Estoppel – It was reasonable for Williams to rely on the 'genuineness' of Mr Crocker's signature and the accompanying witness's signature on the documents.

The Court of Appeal rejected each line of argument and upheld the primary judge's finding.

Lessons from the Case
1. It is not enough to assume, without more, that a signature applied to a document electronically is genuine.
2. The onus is on the party seeking to rely on the guarantee to confirm that a director's signature is genuine and valid.
3. Just because a signature is witnessed, does not mean a company can rely on the signature as being genuine.

It is not enough to assume, without more, that a signature applied to a document electronically is genuine.

*Frank Gambera.
McMahon Fearnley Lawyers Pty Ltd
Tel: (03) 9670 0966

March 2017 - FNSCRD402 - Establish and maintain appropriate security