KEYWORDS: ELECTRONIC SIGNATURES

KEY TAKEAWAY

The recent Supreme Court decision in Claremont 24-7 Pty Ltd v Invox Pty Ltd confirms that the Electronic Transactions Act 2011 (WA) operates so that an email signature will be sufficient to meet the formal requirements associated with creating interests in land.

The case is of interest to construction professionals as it is a further indication of the Court's preparedness to see through the distinction between formal and informal correspondence and look to the substance of the transaction.

The facts

The dispute concerned the lease over premises in Claremont, Perth, owned by the defendant, Invox Pty Ltd (Invox).

First agreement to lease

In May 2013, Invox and the plaintiff, Claremont 24-7 Pty Ltd (Claremont 24-7), reached agreement for the lease of the premises which Claremont 24-7 planned to operate as a gym trading as a franchisee in the "Snap Fitness" franchise. The agreement for lease was conditional on Claremont 24-7 obtaining council approval for its planned operations. This approval was not granted and accordingly the agreement for lease came to an end.

Second agreement to lease

In September 2014, Claremont 24-7 made a new offer to Invox to lease the premises. Protracted negotiations ensued. Claremont 24-7 sought to secure agreement as to the terms of the proposed lease and Claremont 24-7's exclusivity under the agreement for lease before a council meeting (scheduled for 9 December 2014) at which Claremont 24-7's development application was to be considered for approval.

On 5 December 2014, discussions took place between officers of Claremont 24-7 and Invox over the phone and via email. The parties exchanged versions of the proposed lease. Those discussions culminated in Mr Patel, on behalf of Claremont 24-7, sending an email attaching the terms of a lease in an offer to lease (which had been prepared in a Snap Fitness form) to Mr Cheah, on behalf of Invox and Invox's managing agent, a Mr Santa Maria. The offer to lease had been signed on behalf of Claremont 24-7.

Mr Cheah then sent an email to Invox's agent, copying Mr Patel. That email attached the same terms and stated:

"[the] enclosed terms in the Offer by Snap Fitness is acceptable to both parties. Could you kindly capture the terms inside Alpha Properties standard format offer that was used previously and expeditiously provide Offer and new Disclosure Statement to Amar Patel for his perusal and execution." 122

The email concluded "sincerely James Cheah". 123

Following this there were a series of communications between the parties, over a reasonably protracted period, about the transfer of the terms from one form to the other.

Events culminated on 31 December 2014 when Invox, through its agent, stated to Claremont 24-7 that it had agreed to lease the premises to another party and would "not pursue your proposal further."

Claremont 24-7 sought an injunction preventing Invox from entering into any lease with a third party.

The arguments

Invox defended the injunction on a number of bases. However, the crux of the dispute was a typical Masters v Cameron124 analysis of whether the facts supported the existence of a binding agreement as at 5 December 2014. The judge found that at that date there was a binding agreement (in the Snap Fitness Form) that would be replaced when it was put into Invox's preferred form.125

Invox argued that even if an agreement for lease was in place, it was unenforceable because Invox had not actually signed it and, on the basis of either section 34 of the Property Law Act 1969 (WA) or section 4 of the Statute of Frauds 1677 (UK)126 (the Acts). Each of the Acts requires an instrument in writing and a signature in order to create an interest in land.

In response, Claremont 24-7 argued that section 10 of the Electronic Transactions Act 2011 (WA) (ET Act) operated to overcome the lack of a wet signature by Invox on the Snap Fitness Form.

The Court's decision

The Court agreed with Claremont 24-7's analysis and found that:

  • the requirement under the Acts for an instrument in writing was satisfied by the Snap Fitness Form;
  • each of the Acts required a signature to which section 10(1) of the ET Act applied; and
  • the facts (relevantly the use of an email signature, the words "yours sincerely" by Invox's representative and the evident urgency of the situation given the impending council meeting) were such that the requirements of section 10(1) of the ET Act were met.

Conclusion

This case is the first example in Western Australia of section 10 of the ET Act being applied to overcome the lack of a wet signature on a document. Cases from other jurisdictions indicate that an email will not always meet the requirements of the relevant legislation.127

However, the case is indicative of a pragmatic approach by Parliament (and consequently the courts) to the realities of commercial transactions. For construction professionals, it is a further warning that the distinction between formal and informal correspondence is of diminishing importance: so remember, be careful when clicking "send".

http://www.austlii.edu.au/au/cases/wa/ WASC/2015/220.html

Footnotes

122 At [22]
123 At [83]
124 (1954) 91 CLR 353
125 At [54]
126 See Law Reform Act (Statute of Frauds) 1962 (WA) s 2
127 See, eg, Russells v McCardel [2014] VSC 287; J Pereira Femandes SA v Mehta [2006] 2 All ER 891; cf Stuart v Hishon [2013] NSWSC 766; Stellard Pty Ltd v North Queensland Fuel Pty Ltd [2015] QSC 119

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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