Electronic Deeds – Are They Valid?

Legally speaking, the purpose of a deed is to transfer a title (a legal document proving ownership of a property or asset) to another person. If you are meeting with an accountant (like us) to assist you in creating a deed, you may be looking to make a trustee deed for an SMSF, or in other cases, create a deed to:

• Assign intellectual property between related companies
• Enter into a non-disclosure deed to ensure that any confidential information that you share with another party is not disclosed beyond you and the other party
• Document an agreement that you have reached with another party after a dispute
• Provide a bank guarantee or letter of credit
• Transfer property, such as the sale of a house

Due to a common-law requirement in legislation, deeds are traditionally only able to be created/written on paper, parchment or vellum, which meant that legally speaking, deeds could not be created electronically as there was no provision for electronic means in the legislation.

When COVID-19 hit, this had a significant impact as travel restrictions and office closures made it difficult for deeds not only to be created but witnessed and signed while physically present.

To address this gap in the legal approach to creating deeds electronically, some states have addressed it by bridging it with amendments and temporary legislation.

Currently, New South Wales, Queensland and Victoria are the only states to pass legislation that allows for the creation of deeds electronically. Still, Victoria is the only one to have permanently enforced this is in its legislation. Queensland’s legislation will expire 30 September 2021, and New South Wales’s legislation will expire 1 January 2022.

The lack of express wording concerning the common law requirement in state legislation does raise concerns about the enforceability of electronically created deeds which could invoke validation of the documents.

Queensland’s legislation provides an example of ensuring that the common law requirement is addressed appropriately without alienating the common law requirement for deeds. Section 12N(2) of the Justice Legislation (COVID-19 Emergency Response — Wills and Enduring Documents) Amendment Regulation 2020 (Qld Regulations) states that:

An instrument takes effect as a deed… even if —

• it is not written on paper or parchment; or
• it is not an indenture or stated to be an indenture; or
• it is not sealed or stated to be sealed.

It is important to note that a separate legislative instrument temporarily that modified the Corporations Act 2001 (Cth) (CA) to allow companies to execute documents electronically expired on 21 March 2021. Accordingly, for a company to execute a document electronically, it should have express provisions in its constitution.

If a company wishes to execute a deed electronically, it should only do so if the following requirements are met:

• The company’s constitution has an express provision that allows for it to execute documents electronically; and
• It is being executed in a state or territory that has made legislation to allow for a deed to be executed electronically.

To ensure that your deed is in compliance with Australian law, ensure that you speak with a professional (if it’s to do with trusts, you can also come speak with us).