In the ever-evolving digital age, Docusign has emerged as a widely-used method for electronically signing documents. However, as demonstrated in the recent case before Whitby J in the Supreme Court of Western Australia, PROSPA ADVANCE PTY LTD -v- TASOU [2024] WASC 359, relying on a Docusigned contract is not without risks, particularly when the authenticity of the signature is called into question.
The Case Overview
The dispute centred around a loan agreement purportedly signed by Ms. Afroditi Tasou via Docusign, securing her property in Balcatta, Western Australia, as collateral. The plaintiff, Hurstville Finance Pty Ltd, sought to extend the operation of a caveat lodged against Ms. Tasou’s property. The plaintiff claimed that the agreement, which included a personal guarantee by Ms. Tasou, was signed by her electronically in August 2022.
However, Ms. Tasou contested the validity of her alleged signature, arguing that she had never seen nor signed the agreement and had no knowledge of the Docusign process being used in this context. Despite the plaintiff’s insistence on the validity of the agreement, the Court found in favour of Ms. Tasou, concluding that the plaintiff had failed to provide sufficient evidence proving that she had electronically signed the document.
The Risks of Relying on Docusign
This case serves as a stark reminder that reliance on an electronically signed contract—especially when dealing with substantial financial interests—requires rigorous verification processes.
Under the Electronic Transactions Act 2011 (WA), a valid electronic signature must identify the signatory and indicate their intention in respect of the signed document. The method used for the signature must also be “reliable as appropriate” for its purpose or proven to be reliable through additional evidence. In this case, the Court determined that the plaintiff had not satisfied these requirements.
Several issues arose, including:
- Insufficient Verification of Signature: The Court criticised the lack of evidence showing how the electronic signature had been obtained, including details of the email address to which the document was sent and what steps were taken to verify Ms. Tasou’s identity.
- No Evidence of Email Receipt: Ms. Tasou maintained that she had not received any Docusign-related emails and had not consented to the use of Docusign to execute the agreement. Her fiancé, Mr. Watts, confirmed that no emails from Docusign had been found in her email account, further undermining the plaintiff’s claim.
- The Signature Was Not Authentic: Docusign generates a digital representation of a signature rather than an actual handwritten signature. While such methods are legally acceptable, their authenticity may be disputed if there is no clear proof that the signatory had access to and used the relevant email account.
Lessons from the Court’s Findings
In dismissing the plaintiff’s application to extend the caveat, Whitby J emphasised that more concrete evidence was needed to support the claim that Ms. Tasou had signed the agreement. Specifically, the Court noted that the plaintiff did not provide key evidence to prove that Ms. Tasou had access to the email used in the Docusign process or that she had authorised the use of her electronic signature. As a result, the Court was not satisfied that the plaintiff had a caveatable interest in the property.
This case is strikingly similar to the 2023 decision in Bizcap AU Pty Ltd v Sharma, where a caveat was also removed due to insufficient evidence that the first respondent had electronically signed the agreement. In both cases, the Courts highlighted the need for parties relying on Docusign to ensure proper safeguards are in place to verify signatures and avoid the costly consequences of litigation.
It is hard to believe evidence surrounding the identification of the individual signing and the sending and receipt of the documents was not put in evidence. This is especially so on the back of the Sharma decision and Ms Tasou had argued that she did not sign the document since the application to set aside the default judgment.
The attempted application to introduce further evidence came much too late. The Judge in refusing an interim caveat and opportunity to introduce evidence in that regard is correct, too often, the Judge would allow those opportunities, especially when the stakes are high.
Protecting Your Interests with Electronic Signatures
If you intend to rely on electronically signed agreements, particularly in commercial transactions involving significant financial interests or property, here are some key steps to mitigate risk:
- Verify Email and Identity: Ensure that the email address used for the Docusign process is correct and linked to the actual signatory. Take steps to verify the signatory’s identity before sending the document for signature.
- Retain Audit Trails: Maintain comprehensive records of the Docusign transaction, including the exact email sent to the signatory, the IP address of the signatory, and any access codes used. This could serve as additional proof that the signatory consented to the electronic signature.
- Obtain Explicit Consent: Ensure that the signatory provides explicit consent to use an electronic signature. This can be included as a clause in the agreement or in a separate written confirmation.
- Consider a Manual Signature for High-Value Transactions: For particularly important agreements, consider requiring a manual (handwritten) signature in addition to, or instead of, an electronic signature to eliminate any doubts.
Conclusion
While Docusign and other electronic signature platforms offer convenience and efficiency, their use carries certain risks if appropriate precautions are not taken. The decision in PROSPA ADVANCE PTY LTD -v- TASOU highlights the potential for disputes over the authenticity of signatures, especially when substantial property or financial rights are at stake. Businesses and individuals relying on electronic signatures must take steps to ensure their validity or risk losing their legal claims.
In an increasingly digital world, caution and diligence remain crucial when it comes to securing agreements and protecting legal interests.