Times are changing with the introduction and advancement of technology every day. This has led to innovations, even in the last bastion of luddites, in the legal industry. Court documents may now be solely filed online; Contracts for Sale of Land may now be signed and exchanged electronically; and electronic signatures may be placed on agreements and guarantees and considered enforceable, in certain circumstances.

However, when the lawyers get involved, you know the legal arguments will closely follow. Is an electronic signature enforceable? Against whom? The person whose signature it is? What if the signature was affixed by someone else? When will this bind the person whose signature is involved, and further, the entity they represent (for instance their company)? Most importantly, what can creditor do to protect themselves against disputes about the execution of credit applications and contracts where the signature is an electronic one?

Electronic Signatures
First of all, there is now such a breadth of technology available, it is necessary to think about what an 'electronic signature' actually means. Or for that matter, what is a signature? When lawyers get involved even that question is not necessarily as simple as it sounds, and although this is not the focus of this article, it is important to be aware that there have been cases in which "'Signature' in this case, obviously, does not mean the personal signature of the Minister" (Williams v Silver Peak Mines Ltd (1915) 21 CLR 40 at 47–48, in relation to notices published in a Government Gazette purporting to be signed by a minister), and where unsigned documents from an agent of the Official Trustee in bankruptcy, which had her typewritten name at the end of it, was a form of "signature" sufficient for the relevant provision of the Bankruptcy Act 1966 (Coshott v Coshott [2010] FCA 300).

In electronic terms, an electronic signature could include typing an individual's name, placing a copy of a computer file (for instance a jpg file) containing an image of an individual's signature in an appropriate field, clicking an 'I Accept' box, or using a personal identification number.

A second preliminary issue is a practical one which arises in all matters, electronic or otherwise. When a document is signed electronically, it is vital to ensure that the relevant terms and conditions that are to be agreed upon by the parties are able to be identified from the signed document and have been made available (and remain available) to the customer. Ideally the signature and the terms are held by the relevant company together as one document. This becomes problematic as terms and conditions become documents placed on websites, and are altered from time to time. It can become a large issue to confirm which version of the company's terms and conditions were in existence at the time the contract was entered into, and also, what evidence there is that these terms were accessible and were agreed by the consumer.

Electronic Transactions Legislation
Over the past 2 decades, the Australian government has attempted to provide protection for parties entering into transactions either wholly or partly by electronic means and to progress together with the change in technology. With the introduction in 2000 of the national scheme of Electronic Transactions Acts ("the ETA Scheme") in the Commonwealth and all states and territories (with the initial exception of Western Australia who came on board in 2011), it seemed as though Australia was on track to increase the certainty of electronic transactions. This legislation was introduced as "part of the Government's strategic framework for the development of the information economy in Australia" and set about "ensuring that Australians enjoy the social and economic benefits offered by the growth of the information economy" (Electronic Transactions Bill 1999 Revised Explanatory Memorandum).

It’s a Crocker!

However, the recent decision in Williams Group Australia Pty Ltd v Crocker [2016] NSWCA 265 (22 September 2016) (“Crocker”) has suggested that there are some significant limits to the usefulness of the ETA Scheme.

This decision, by the Court of Appeal of the Supreme Court of New South Wales, raises a number of issues for creditors, especially those who allow electronic signatures to be used on credit applications and accompanying all-moneys guarantees. The creditor set out the stakes which were in issue (at [4]):

“Williams raises the spectre that, if this appeal is not allowed, the ability of a trade creditor ever to rely on electronic signatures will be in real doubt.”

Crocker involved an appeal by a creditor, seeking to enforce an all-moneys guarantee against a director of a company, now in liquidation. The guarantee and the accompanying credit application had been signed electronically by all three directors of the company, apparently witnessed by the company’s administration manager. The signatures had been placed on the documents using a system known as HelloFax, which required a username and login before the signature would be attached to the documents, which was then faxed to the creditor. On the basis of the credit application and guarantees the creditor supplied goods on credit totalling $889,534.35 before the company was wound up.

Summary judgment was obtained against the 2 co-directors, however Mr Crocker argued that his electronic signature had been placed on the documents without his authority, knowledge or consent by an unidentified individual. As it transpired, Mr Crocker had been provided with a username and password by a member of staff. However he has not changed the password given to him since receiving it, which meant that any of his co-workers with access to his login and password could have gained access to his account and placed his electronic signature on the documents.

The evidence disclosed that Mr Crocker had used the system to affix his signature to a credit application (and guarantee) for a different supplier, only a few days before the relevant documents were signed, and on a number of occasions subsequently. However Mr Crocker was able to provide evidence of the fact that he had not been the person to place his electronic signature on the document, that it had been affixed in a different office of the debtor company from the one in which he was located at the time.

The trial judge considered it important that the signature used was different from the one Mr Crocker had himself loaded when setting up his registration in the system. The trial judge was satisfied that Mr Crocker had not provided his authority to any person to affix his signature using the HelloFax system, and that it has been affixed without his knowledge or consent, that he had not seen the email notifications which would have been sent to him that his signature was in fact being used, and nor did his subsequent conduct ratify the use of his signature for the guarantee. The trial judge dismissed the claim and the creditor appealed.

The Court Of Appeal Judgment

On appeal, the creditor did not dispute the trial judge’s finding that there was no actual authority for Mr Crocker’s signature to be used on the guarantee. Rather, it argued:

- Mr Crocker gave ostensible authority to whoever it was who affixed his signature, given he failed to change his password and ID and uploaded his signature to the system; essentially the creditor was arguing that the establishment of a system - for attaching electronic signatures was a representation to trade creditors that the signatures had been authorised;
- Mr Crocker had ratified the guarantee;
- Mr Crocker was estopped from denying the guarantee was operative.

The Court of Appeal of the Supreme Court of New South Wales dismissed the appeal.

Firstly, the Court of Appeal held that in order for the use of his signature by someone else to be binding upon him, Mr Crocker must in some fashion have made a representation to the creditor that his electronic signature had been placed with his authority, and in turn the creditor must have relied on the representation. However:

- Mr Crocker did not implement the Hellofax system, he merely “participated in its use” (at [67], and his use of such a system could not be a representation by Mr Crocker that others were authorised to use it to affix his signature;

- Given Mr Crocker did not know the documents had been signed the creditor could not have relied upon his adoption of the system as a representation in any event;

- Mr Crocker’s failure to change his password for the HelloFax system did not “arm” anyone at the company to use his signature and so did not amount to holding out to the creditor that any person had authority to affix his signature; and

- The systems used may well have been representations made by the company or by other officers or employees that Mr Crocker was authorised to bind the company, but did not amount to representations by Mr Crocker that someone else could affix his signature to a document.

Insofar as ratification was concerned, the Court of Appeal found that the mere fact that an email had been sent to Mr Crocker showing his signature had been affixed, did not give him sufficient notice of the guarantee to be bound by it. Nor was the court persuaded that Mr Crocker should be treated as having knowledge of the guarantee because he “shut his eyes to the obvious” (at [128]). The Court wasn’t satisfied that this was the case, as the system would not have shown that his signature would have been affixed to a guarantee, merely to the credit application.

The Court did not accept the estoppel argument either. The only representation the Court was satisfied had been made was that Mr Crocker’s signature was on the guarantee. Even if the creditor had relied upon it, this was not a representation by Mr Crocker and did not preclude him from denying personal liability on the guarantee.

In a point which the Court did not need to decide, but which will become relevant in other cases, the Court held that it was not clear whether an electronic signature which was affixed without authority, could amount to a “forgery” in accordance with the case law. This will become important because Mr Crocker argued that if this was the case, then the law is that a forgery cannot be ratified, so that even if the evidence against him had been stronger, he could still not have been held to have ratified the guarantee.

In the end the Court of Appeal dismissed the appeal and ordered the creditor to pay the costs of Mr Crocker.

What Does this Decision Mean for Electronic Signatures?

The result in Crocker means that creditors need to be extra cautious when conducting transactions either partly or wholly through an electronic medium. It is perhaps impossible to put the genie back in the bottle, and suggest that creditors should stop using electronic means to conduct business. In the digital age, electronic signatures are ubiquitous. From emails, to letters, to formal legal documents – they are convenient, and allow for documents to be sent whilst the author is unable to place a physical signature on a document, or where a document is being signed on someone’s behalf. But this begs the question – with actual signatures being scanned and sent in an electronic form, it is often impossible to tell whether a signature provided electronically was original or electronic in its initial form. So what use is the ETA scheme?

The creditor in Crocker appeared to have believed that Mr Crocker’s signature was legitimate, especially as it was provided to them by facsimile. It is not clear what more the creditors could have done to protect without physically attending and witnessing the guarantors each execute the guarantee. Any further protection will to come from the courts. In Crocker, Justice Ward (with whom Simpson and Payne JJA agreed) acknowledged the creditor’s concern about the (lack of) usefulness of electronic signatures, but held that “If it is the case that drastic consequences flow from the application of the principles relating to ostensible authority and ratification in the electronic signing context, that may be a matter for the legislature to address” (Crocker at [4]).

It is too early to know whether the government will respond to the difficulties with electronic signatures raised in Crocker and whether it will consider further protections and certainty for creditors entering into electronic transactions.

So where do I sign?

Until there is any legislative reform it is important for creditors to consider what processes they will adopt to minimise the risk of unenforceable agreements, arising from electronic signatures.

So what steps can creditors take?

Pursuant to s 187 of Schedule 1 of the National Consumer Credit Act 2009 (Cth) (“the Credit Act”), a contract, mortgage or guarantee may be signed by use of an electronic signature and declared effective in accordance with the Electronic Act.

Section 10 of the Electronic Act sets out the requirements for use of an electronic signature, being:

1. A method is used to identify the person and to indicate the person’s intention in respect of the information communicated; and

2. The method used is reliable or proven in fact to identify the person and the person’s intention; and

3. The signature is in accordance with any IT requirements of the entity; and

4. Consent must be given by the person receiving the signature to use of an electronic signature as a method of signing.

In Crocker, the system maintained by the company included a confirmation email sent to the director/guarantor regarding use of his electronic signature. However:

- The creditor was not able to prove that Mr Crocker received, opened or read such email; and

- The creditor was unaware of the existence of such emails until the proceedings had been commenced.

It would have been open to the creditor to have confirmed Mr Crocker’s identification, sent its own confirmation email, confirming his electronic signature was placed on a contract at the time, and that the contract was now binding. It is possible, that in those circumstances, the end result of the case would have been substantially different. However there remains the difficulty regarding use of an email address for confirmation. Much in the same way the electronic signature was able to accessed by persons other than Mr Crocker, so to could it have been said that the confirming emails were either not received, or if a response was sent to the creditor, that it was sent by someone other than Mr Crocker without his knowledge or permission. Nevertheless, the more communication with the guarantor, regarding provision of the guarantee, the greater the chances of proving the guarantor was aware of the execution of the contract using his or her electronic signature, and the greater chance of success of the estoppel, representation and ratification arguments which failed in Crocker.

Whatever steps are taken, if an electronic signature is or may be used when entering into a contract, the question needs to be asked – how will I be able to prove the connection between the person whose signature is on the document and their intention to be bound by the document.

A further issue arises with an electronic signature in regards to the witnessing of such signature. What does a witness of an electronic signature even mean? The whole point of an electronic signature is the lack of formal execution, so in what sense is it even possible for someone to witness an electronic signature? An electronic signature is not required to be witnessed, so long as the entity that is to receive and rely upon the electronic signature consents. If a witness is to be required, the same issue exists whereby identification and intention of the witness will be required to be proved by the creditor company.

Abandoning the use of electronic signatures in this day and age is just not a possibility. The world will only become more reliant upon technology and avoiding use of such technology will only leave a company falling behind in the industry. This issue also arose and continues to exist on the introduction of websites for order forms, supply arrangements and the establishment and variation of terms and conditions.


Should creditors wish to enter into contracts with customers electronically and allow the use of electronic signatures, then at the very least consideration should be given to establishing a process to confirm:

- Who affixed the electronic signature;

- The authority of the person to affix the electronic signature (if not affixed by the person whose signature it is);

- Evidence of the knowledge of the relevant person that his or her signature has been affixed, and to what contract (if both a credit application and a guarantee, for instance).

Failure to put such process in place may make the enforcement of electronic contracts much harder, and may cause a substantial loss to your company in the future, should the relevant customer default on payment in accordance with the contract. There are also other forms of technology that may mitigate authentication risks (such as public key cryptography) and you should seek both legal advice and IT advice in respect of the effectiveness of the systems in place in your company. 


By Bonnie McMahon and Hayley Hitch, Solicitors and Stephen Mullette, Principal of Matthews Folbigg Lawyers, in our Insolvency, Restructuring and Debt Recovery Group

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