CHAPTER ONE – WHAT IS A SIGNATURE?
This Practical Guide considers the implications for conveyancers of HMLR’s acceptance of witnessed electronic signatures. Before we consider the details of how this will work in practice, this chapter will consider what amounts to a signature and the legal status of the electronic signature.
‘What is a signature?’ may seem like a very obvious question, but there are a wide range of actions capable of constituting a ‘signature’. It is generally accepted to mean the physical act of someone writing their own name, in the same way, each time they sign a document. However, a signature does not have to involve writing a name; it could be making a mark or putting a cross on the page. The method used to sign a document is important – it usually requires the signatory to use a pen to make an indelible mark (as opposed to a pencil, for example) and this is what would be described as a ‘wet ink’ signature and is the form of signature with which conveyancers are most familiar. The FCA described it neatly as: ‘signing a document by hand using a pen’.
The wet ink signature has been an integral part of the conveyancing process for a long time. In addition to being the means by which a buyer or seller will indicate their acceptance to the contents of a document, in more recent times it has also served as an additional tool in the conveyancer’s risk management armoury. Typically, as part of the firm’s due diligence processes, a conveyancer will take a copy from an original document provided by the client (usually a passport or driving licence) which in addition to giving a photographic representation as to the likeness of the client, contains a signature against which the conveyancers should then check subsequent signatures purporting to be those of the client.
The production of a passport as part of the identification procedures is not fool proof and there are weaknesses to the wet ink signature process which will be considered in Chapter 6.
Having established that a signature does not have to be made in wet ink and use the name of the signatory at all, it is then necessary to consider the purpose of signing a document at all. This is widely accepted and well known in that the purpose of asking someone to put their name to a document is:
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for the signatory to indicate their acceptance of the terms of that document; and
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to confirm that they have read and understood the document; and
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to confirm their intention to be bound by the terms of that document
Terminology
Before we move on to consider witnessed electronic signatures in detail, it is necessary to clarify various terms. The terms ‘digital signature’ and ‘electronic signature’ are often used to mean the same thing, but they are different. Broadly, ‘electronic signatures’ is an umbrella term which includes digital signatures. Electronic signatures use an electronic process to act as the acceptance by the signatory of an online document, record or agreement. This is not necessarily a completely secure process, particularly if unencrypted email is part of the process.
An electronic signature might involve the signatory:
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‘Signing’ their name with their usual signature with a stylus or finger to signify acceptance
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Typing their name at the bottom of a document
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Using a scan of their signature that has previously been written in wet ink
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Clicking a button on a website to denote acceptance
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Using a web-based e-signature platform
If a more secure method of electronic signature is required, a digital signature will be used. This uses encryption to ensure authentication. Providers may use Public Key Infrastructure (PKI) technology in the creation of their digital signature platform. In its simplest terms, PKI requires an algorithm to produce two ‘keys’ – these are long numbers, one of which is public and one private. Digital signatures essentially link these keys to prove authenticity.
As indicated in the introduction, this Practical Guide is not aiming to give a detailed explanation of the complex technological steps required to create safe signature processes by electronic means. Such explanations are beyond the scope of this book and the knowledge of the writer. However, when sourcing a platform provider, conveyancers should ensure that they understand the process used to create the signature platform and are satisfied, to the extent possible, as to security and authentication.
HMLR refers to various forms of electronic signature as follows:
Mercury signatures
This is a basic form of electronic signature in that it allows for a signature page to be signed in wet ink (in the physical presence of witness). The signature page will then be captured with a scanner or camera and is sent back to the conveyancer by a single email which includes the scanned signature page and a copy of the final agreed document, the terms of which that signature is accepting. See Chapter 3.
Witnessed electronic signatures
This is the replacement within a standard deed (typically a transfer) of a wet ink signature with an electronic signature. A witness must still be present at the time the signatory adds their electronic signature. The witness must also ‘sign’ electronically. For HMLR purposes this form of signature requires two factor authentication and is the form of electronic signature on deeds which HMLR confirmed that it would accept on 27 July 2020. This Practical Guide focuses on this aspect. See Chapter 4.
Qualified electronic signatures
This is a form of signature operating on the basis that a Qualified Trust Service Provider has standards in place to securely and accurately verify the identity of the signatory which protects the integrity of the document. This is a more secure form of signing as the identification checking and encryption are carried out to a specified standard which is controlled by a regulated body. This form of signature is not yet accepted by HMLR. See Chapter 7.
Platform/platform provider
The HMLR guidance on witnessed electronic signatures refers to a ‘platform’. In this context it refers in generic terms to an electronic system for the delivery and management of information including, of course, conveyancing documents. As mentioned later in this Practical Guide, HMLR will not endorse any particular platform or provider; conveyancers must research the market and source a provider which meets their needs. In this Practical Guide, we will refer to ‘platform provider’ to mean the commercial organisation which a firm will choose to provide a system enabling witnessed electronic signatures of deeds that meets specific HMLR requirements.
Deed/transfer
This Practical Guide is considering a form of witnessed electronic signature which is specifically mandated by HMLR and is specific to the conveyancing process in England and Wales. This Practical Guide will outline which deeds HMLR will accept for registration purposes signed in this manner but for the most part it is likely to be the transfer which is signed using witnessed electronic signatures thus, for ease of reference, this is the document which we will refer to as typically being signed in this way.
Note that HMLR would accept a mortgage deed signed using a witnessed electronic signature but it is not clear that the lenders will yet agree to this. For more information, see Chapter 4.
Note also that Lasting Powers of Attorney and statements of truth cannot be signed using the witnessed electronic signature.
Are electronic signatures legally valid?
Having established in broad terms the definition of an electronic signature, let’s move on to consider whether electronic signatures are legally valid.
Law Society
In the Practice Notes referred to in the ‘resources’ section the Law Society concluded that:
‘The Law Commission published the conclusions of its work in the autumn of 2019 and confirmed that an electronic signature is capable in law of being used to execute documents (including deeds). This was helpful as it corroborated the view we previously expressed in the e-signature practice note.
The Law Commission emphasised the need for authentication and the need to follow formalities of execution, and highlighted that the courts have previously held that simple markings such as an ‘X’ made by the hand of the maker may constitute a valid and binding signature.
In many cases, execution by means of an authenticated electronic signature will deliver much greater transactional certainty and security than means of execution previously upheld by the courts.
However, at the time of writing there is no definitive statement from a higher court upholding electronic signatures and, in the absence of a court decision or primary legislation, there remains an inconsistent approach to the use of electronic signatures.
The Law Commission has recommended a review of the law of deeds and suggested that government may wish to consider codifying the law on electronic signatures in order to improve the accessibility of the law.’
© The Law Society, www.lawsociety.org.uk
Law Commission
The acceptance of witnessed electronic signatures in July 2020 in the midst of a global pandemic was driven to some extent by the latter and the need for conveyancers to have some flexibility as to how clients signed deeds submitted for registration, but much of the ground work had been done by the Law Commission. Practitioners who are interested in this area more generally should read the influential report released on 4 September 2019. The following are what the Law Commission described as the ‘high level conclusions’ of their report, which focussed on two key aspects of the electronic execution of documents, namely:
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the use of electronic signatures to execute documents where there is a statutory requirement that a document must be “signed”; and
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the electronic execution of deeds, including the requirements of witnessing and attestation and delivery.
Notably the report did not include wills nor to registered dispositions under the LRA 2002. We will see that HMLR has moved on since the Law Commission published its report (and will signing is outside the scope of this book).
Statement of the law: execution with an electronic signature
‘An electronic signature is capable in law of being used to execute a document (including a deed) provided that
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the person signing the document intends to authenticate the document and
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any formalities relating to execution of that document are satisfied.
Such formalities may be required under a statute or statutory instrument, or may be laid down in a contract or other private law instrument under which a document is to be executed. The following are examples of formalities that might be required: (i) that the signature be witnessed; or (ii) that the signature be in a specified form (such as being handwritten).
An electronic signature is admissible in evidence in legal proceedings. It is admissible, for example, to prove or disprove the identity of a signatory and/or the signatory’s intention to authenticate the document.
Save where the contrary is provided for in relevant legislation or contractual arrangements, or where case law specific to the document in question leads to a contrary conclusion, the common law adopts a pragmatic approach and does not prescribe any particular form or type of signature. In determining whether the method of signature adopted demonstrates an authenticating intention the courts adopt an objective approach considering all of the surrounding circumstances.
The Courts have, for example, held that the following non-electronic forms amount to valid signatures:
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signing with an ‘X;
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signing with initials only;
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using a stamp of a handwritten signature;
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printing of a name;
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signing with a mark, even where the party executing the mark can write; and
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a description of the signatory if sufficiently unambiguous, such as “Your loving mother” or “Servant to Mr Sperling”.
Electronic equivalents of these non-electronic forms of signature are likely to be recognised by a court as legally valid. There is no reason in principle to think otherwise.
The courts have, for example, held that the following electronic forms amount to valid signatures in the case of statutory obligations to provide a signature where the statute is silent as to whether an electronic signature is acceptable:
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a name typed at the bottom of an email;
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clicking an “I accept” tick box on a website; and
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the header of a SWIFT message.
With specific regard to deeds and the witnessing requirements thereof, a deed must be signed in the physical presence of a witness who attests the signature. This is the case even where both the person executing the deed and the witness are executing / attesting the document using an electronic signature.’
© Crown copyright
eIDAS Regulation
Another important factor governing the development of the use of electronic signatures in conveyancing is the Regulation (EU) 910/2014 on electronic identification and trust services for electronic transactions in the internal market. It came into force on 1 July 2016. At the moment at least, as a European regulation, it has direct effect in UK law and automatically applies in the UK. The ICO website contains useful information and detail about the Regulation. The basic premise behind the Regulation is to give a framework allowing European citizens to use electronic identification to access online public services in other EU member states.
The impact which leaving the EU might have is difficult to assess. However, HMLR is working on Qualified Electronic Signatures and the eIDAS Regulation is informing that work. Conveyancers who are interested should consider signing up to HMLR email updates and responding to future consultations.
Signatory’s intention
Central to the above conclusions as to validity of electronic signatures is that it must be possible to conclude from the conduct of the signatory that they intended to authenticate the document being signed electronically and thus be bound by its contents. A digital audit trail which can be created when using electronic signatures will generally be evidence of the intention of the signatory to authenticate and be bound by the document, although fraud, for example, would invalidate such intention.
HMLR
All of the above has led HMLR to conclude that witnessed electronic signatures are acceptable for deeds which are submitted for land registration purposes. This is the scope of this Practical Guide. When considering in a broader context whether a document signed by electronic means will be legally valid, practitioners will need to keep in mind the nature of the document, the signatory, any statutory requirements and jurisdictional issues.