Time is usually of the essence in business. Businesses have therefore embraced modern technologies that enable them to operate from different countries, in different time zones, with speed. However, compliance with legal formalities poses challenges for practitioners where signatories are not physically available at completion meetings.
In particular, lawyers have been juggling with the implications of the decision in R (on the application of Mercury Tax Group Ltd) v Commissioners for HM Revenue & Customs [2008] EWHC 2721 (Admin); [2009] PLSCS 254 (a tax case in which a taxpayer’s solicitor obtained a signed execution page from a client before a document was finalised and attached it to the final version). The judge ruled that the document was invalid because it was intended to be a deed, and section 1(3) of the Law of Property (Miscellaneous Provisions) Act 1989 requires parties to sign the actual document that constitutes the deed.
Time is usually of the essence in business. Businesses have therefore embraced modern technologies that enable them to operate from different countries, in different time zones, with speed. However, compliance with legal formalities poses challenges for practitioners where signatories are not physically available at completion meetings.
In particular, lawyers have been juggling with the implications of the decision in R (on the application of Mercury Tax Group Ltd) v Commissioners for HM Revenue & Customs [2008] EWHC 2721 (Admin); [2009] PLSCS 254 (a tax case in which a taxpayer’s solicitor obtained a signed execution page from a client before a document was finalised and attached it to the final version). The judge ruled that the document was invalid because it was intended to be a deed, and section 1(3) of the Law of Property (Miscellaneous Provisions) Act 1989 requires parties to sign the actual document that constitutes the deed.
The case underlines the risks of arranging for contracting parties to sign documents that are not in final form. It has also led to concerns about the extent to documents can be amended after they have been signed but before they are dated and completed. In addition, it will cause conveyancers to reflect on the requirements of section 2 of the 1989 Act, which imposes strict requirements in respect of contracts for the sale of interests in land. All such contracts must be made in writing and must be signed by or on behalf of each party. Additionally, unless all parties sign the same document, they must exchange contracts containing identical terms.
The City of London Law Society has published guidance, based on advice from a leading barrister, setting out options available to parties when executing documents at virtual closings. The guidance is intended to be used where a document has been agreed but some or all of the signatories are not present to sign the document at the completion meeting. It is understood that the guidance has the support of counsel with considerable expertise in property law, who consider that if the guidance is correctly followed the risk of invalidity will be low. As a result, many hoped for a consensus that would put paid to insistence on documents with “wet ink” signatures.
However, traditionalists still harbour doubts over the validity of “virtual” documents, especially since dispositions of land usually require registration at the Land Registry and its attitude to virtual documents remains uncertain. Concerns also remain that the decision in Milton Keynes Development Corporation v Cooper (Great Britain) Ltd (1995_ 69 P&CR 221 – where the Court of Appeal held that an exchange of faxes did not qualify as an exchange of contracts for the purposes of section 2 – will continue to represent the law in England until it is overturned by legislation or by a higher court. A recent Scottish case may add to the debate. In Park, Petitioners [2009] CSOH 122, the Court of Session ruled that, under Scottish law, original signed documents – not faxes – must be delivered to the other party for missives to be concluded.
Modern businesses rely on fax and e-mail to meet tight deadlines and will deplore disagreements between lawyers over the legal requirements that must be satisfied to create legally binding contracts and dispositions. However, the debate seems set to continue, pending further judicial or legislative intervention.
Allyson Colby is a property law consultant
