Land Law 2020 Assignment

Answer

The Use of Digital Signatures in Conveyancing

The era of technology has revolutionized the manner in which most transactions are conducted. This shift has also been witnessed within the national conveyancing system. The government of Australia has expressed its commitment to the continuous development of a National Electronic Conveyancing System (NECS) so as to ensure that conveyancing transactions are largely digitized. During a meeting of the Council of Australian Governments (COAG) in 2008, the COAG expressed their support for the establishment of such a system since it was apparent that it would foster "an efficient national platform to settle lodge instruments with land registries and meet associated duty and tax obligations electronically through a national system".^[1] The successful implementation of this system essentially means that there are certain pertinent changes that will made to conveyancing practices and one crucial one relates to the use of digital signatures. Whereas these changes have numerous potential benefits for the users of the system, there are certain underlying difficulties that are attached to the use of digital signatures as opposed to physical signatures. This paper will delve into a discussion of the difference between a physical signature and a digital signature, as well as, an analysis of the potential difficulties that this conversion has created for the transfer of land interests.

Difference between a Physical Signature and a Digital Signature

            A physical signature, also referred to as a handwritten signature is a wet signature that is created when an individual manually places a distinctive mark on a paper.^[2] The distinctive mark that is often placed is a handwritten depiction of the individual's name, nickname or any other officially recognized mark that the said individual places on documents as proof of their intent or their identity.^[3] The placement of physical signatures on documents is an age-old practice and when reference is made to the distinctive elements of the formation of a contract, a physical signature traditionally speaks to the intention of the parties to enter a legally binding agreement. It is clearly distinguished from a digital signature due to the fact that it is handwritten.

            Digital signatures are created using cryptographic means as opposed to the placement of a mark on a paper.^[4] It is essentially a mathematical scheme that is used to provide proof for the authenticity or originality of digital documents.^[5] When the prerequisites of a digital signature are satisfied, the recipients of the digital documents are satisfied about the authenticity of the transaction. Apart from the manner in which digital signatures are generated, a digital is differentiated from a physical signature because of the fact that the former requires the use of certain prescribed components such as "the use of a Certification Authority (CA) to manage the keys required for digital signatures, the use of strong algorithms for the generation of the digital signature, secure storage of the private key, all of which are not required for handwritten signatures".^[6] Currently, digital signatures are considered as being sufficient to provide conclusive proof of the authenticity of the document in question. Section 12 of the Electronic Conveyancing (Adoption of National Law) Act 2013 provides that indicates that digital signatures offer a definitive proof of identity and this position remains so for as long as the signature has not been repudiated.^[7]

Potential Difficulties Arising from the Conversion

            One of the initial challenges that come with the use of digital signatures relates to algorithm selection. As noted above, digital signatures are created through the use of cryptographic algorithms and the algorithms provide varied strengths of security depending on the key size that has been utilized.^[8] The longer the key size is, the more plausible it is that the security being created is formidable.^[9] When the key sizes are small, they do not provide the much needed security.^[10] A fraud risk arises when a user opts to use weak algorithms.^[11] Weak algorithms can easily be attacked by fraudulent persons and once the attack has been successful, the digital signature can easily be forged.^[12] The problem of the use of weak algorithms is a pertinent one because they can easily be forged and it can as such be concluded that when documents are attested to through digital signatures, the authorship of the document can easily be put to question.^[13] In the case of Williams Group Pty Ltd v Crocker [2016] NSW CA 265 the NSW Court of Appeal called into question the reliability and effectiveness of the use of digital signatures.^[14] In this case, a director's guarantee had been attested to through the use of a digital signature and in this regard, a digital key that belonged to the director was used to execute the document without the knowledge of the director.^[15] The court held that the use of the digital signature would not be seen as amounting to ostensible authority.^[16] This case illustrates the fact that the use of weak algorithms is a potential difficulty that will be attached to the use of digital signatures since an individual's digital key can easily be utilized by another person without his or her authority.^[17] It is, however, important to note that there are numerous advantages that are attached to the use of digital signatures. Weak algorithms that can easily be compromised are not often used in most instances and strong algorithms provide a high level of security that cannot easily be compromised.^[18] The use of the encryption verification technology that is known as the Public Key Infrastructure (PKI) ensure that digital signatures provide the highest standard for verifying and identifying individuals and corporations.^[19]

In line with the issue of weak algorithms, it is important to highlight the significance of transfer of interests in land during conveyancing transactions. A significant part of conveyancing is indeed concerned with the transfer of interests in land and in this regard, individuals need to provide their consent.^[20] This consent is now provided through digital means in the form of e-signatures and unlike the handwritten signatures that are often not signed remotely, e-signatures arguably not tamper-proof.^[21] An impostor can easily sign the document in place of the individual owner of a particular interest in land. In the case of Attorney-General (SA) v Corporation of the City of Adelaide [2013] HCA 3, a certificate was meant to be executed by a lawyer but the lawyer did not place his signature on the electronic document.^[22] Only the lawyer's name appeared on the document.^[23] The court held that the placement of the lawyer's name on the email constituted sufficient attestation of the document.^[24] Although the certificate that was meant to be signed did not relate to a conveyancing matter, the case speaks to the fact that digital signatures are not tamper-proof. A similar decision was arrived at in a conveyancing matter; in the case of Kavia Holdings Pty Limited v Suntrack Holdings Pty Limited [2011] NSWSC 716, the court held that "the inclusion of the sender’s name on the email amounted to ‘signing’ for the clause (providing for an option to renew in a lease)".^[25] It was further noted that the object of signing was to provide identification for the sender and to authenticate the information being communicated.^[26] The above cases speak to the fact that the placement of a name on a digital document can constitute a valid signature and in this regard, individuals need to be careful when signing off the documents using their names on email.

Another complexity that arises with the use of digital signatures is that no matter the level of security that the digital keys possess, a third party can still insist on getting independent authentication of the integrity of the signature.^[27] This is done for the purpose of ensuring that the contract for the transfer of interest in land is not vitiated with an illegality.^[28] When the third party or any party to the contract insists on the issuance of independent verification, the certification authority will have to issue a public key.^[29] The certificate will be deemed to be conclusive proof of the key being associated with the particular sender. The standard for verification of identity in conveyancing transactions has been set in Schedule 8 of the Model Participation Rules that have been set by the Australian Registrars’ National Electronic Conveyancing Council.^[30] The case of Astell v Australian Capital Territory [2016] ACTSC 238 has contributed to the incorporation of such procedures since in that case, a land owner who was defrauded of her property which was sold without verification of identity of the seller was able to recover damages from the state.^[31] When compared to the verification process that is often attached to the use of physical signatures, it is apparent that this process is time-consuming. The potential difficulty that will arise with respect to the transfer of interests in land is that the process will be lengthier. 

Another significant difficulty that arises with respect to the use of digital keys relates to the diligence attached to the storage and protection of the keys.^[32] Digital keys often need to be protected from any threats of exposure, modification, and destruction.^[33] The user is often charged with the fundamental responsibility of protecting the integrity of their digital key since ideally they are the only persons who have access to the key.^[34]  If the user is not diligent in protecting the integrity of their digital key the key subsequently becomes compromised. In this regard, Rule 12.4 of the Conveyancing Rules (COVID-19 Pandemic) Amendment indicates that any person who signs electronically must present proof of the authenticity of their identity and they must similarly provide intimation for their intention to execute the document digitally.^[35] This is done by either including information on the instrument near or above the digital signature showing "their full name, whether the signature was placed by them or at their direction, and the date on which the signature was placed".^[36] The problem of storage and protection of keys is a significant one when it comes to the use of digital signatures.

In the age of technological innovation, another difficulty that can arise with the use of digital signatures is the incorporation of technological changes that can see data being altered or becoming obsolete thus difficult to access.^[37] If changes are made with respect to the manner in which the cryptographic combinations are arrived at, it is possible that in years to come, some digital signatures will become outdated thus difficult to access.^[38] This will affect the ease of transfer of interests in land since individuals will have to resort to the use of physical signatures for the purpose of executing conveyancing documents or they would have to make the necessary updates before they can be allowed to execute their documents digitally.

            The use of digital signatures will also mean that conveyancing transactions will be completed in the absence of a lawyer. The conversion will limit face to face interaction between the lawyer/conveyancer and the client.^[39] This means that the client will not be able to leverage the advantages that are attached to having a lawyer present during the transactions.^[40] A lawyer will ensure that all the necessary conditions that need to be present during the completion of the contract are actually present. A lawyer will also provide advice regarding the terms of the contract.^[41] Where the bank is involved, or a mortgage or charge instrument needs to be prepared, a lawyer will be present to ensure that all the funds are available at the point that they are needed.^[42] With respect to arranging settlements, the lawyer or conveyancer will also play the role of making adjustments to the rates and taxes, conducting a search for the title certificate, and conducting a search for any encumbrances that may affect the value of the property.^[43] A lawyer also ensures that the rights and interests of the vendor have been catered for throughout the conveyancing process.^[44] The use of digital signatures connotes that conveyancing transactions will be completed directly between the respective parties without the input of a lawyer or a conveyancer. As illustrated above, this is likely to result in numerous challenges for both parties to the transaction.

            The technological era has led to a significant shift in the manner in which conveyancing transactions are handled. One of the distinctive changes that have been witnessed relates to the use of digital signatures. This form of attestation is distinguishable from physical signatures since whereas the latter is handwritten and in drawn manually, the former is generated through cryptographic means and is in this regard a mathematical means through which an individual's identity is established. The use of digital signatures has brought about numerous potential difficulties. Some of the main difficulties relate to the use of weak algorithms (this causes the signatuares to lack authenticity), insecure transmission (in the event that the digital key is being generated by a system), lack of diligence with respect to the storage and protection of the keys (provides a loophole that can be exploited by fraudsters), and lack of advice and assistance from a lawyer or a conveyancer in the course of the conveyancing transaction. Although the introduction of the use of digital signatures has made the process of conveyance and transfer of interests in land more seamless, it attracts numerous potential difficulties that will be detrimental to the bona fide users of the a National Electronic Conveyancing System (NECS).

[1] See Council of Australian Governments’ Meeting 3 July 2008, at <http://www.coag.gov.au/coag_meeting_outcomes/2008-07-03/index.cfm#economy>

[2] Thakare Bhushan, Hemant Deshmukh, and Parikshit Mahalle. "Handwritten signatures: An understanding." International Journal of Computer Applications 139.4 (2016): 21.

[3] Ibid, 21.

[4] Low, Rouhshi, and Ernest Foo. "The susceptibility of digital signatures to fraud in the National Electronic Conveyancing System: an analysis." Australian Property Law Journal 17.3 (2009): 310.

[5] Zhang, Jen. (2010, May). “A study on application of digital signature technology”. In 2010 International Conference on Networking and Digital Society, Vol 1 498.

[6] Low Rouhshi, and Ernest Foo. "The susceptibility of digital signatures to fraud in the National Electronic Conveyancing System: an analysis." Australian Property Law Journal 17.3 (2009): 310.

[7] Electronic Conveyancing (Adoption of National Law) Act 2013, Section 12.

[8] Zhang Jen. (2010, May). A study on application of digital signature technology. In 2010 International Conference on Networking and Digital Society, Vol 1 498.

[9] Ibid, 498.

[10] Lax Gianluca, Francesco Buccafurri, and Gianluca Caminiti. "Digital document signing: Vulnerabilities and solutions." Information Security Journal: A Global Perspective 24.1-3 (2015): 5.

[11]Ibid, 5.

[12] Ibid, 5.

[13]Duffy Susan and Shelton Geoff. “E-Conveyancing Simplified”. Thomson Reuters (Professional) Australia Limited (2014) 24.

[14] Williams Group Pty Ltd v Crocker [2016] NSW CA 265.

[15] Ibid, 265.

[16] Ibid, 265.

[17] Ibid, 265.

[18] Lozupone Vincent. "Analyze encryption and public key infrastructure (PKI)." International Journal of Information Management 38.1 (2018): 42.

[19] Ibid, 42.

[20] Duffy Susan and Shelton Geoff. “E-Conveyancing Simplified”. Thomson Reuters (Professional) Australia Limited (2014) 24.

[21] Ibid, 24.

[22] Attorney-General (SA) v Corporation of the City of Adelaide [2013] HCA 3.

[23] Ibid, 3.

[24] Ibid, 3.

[25] Kavia Holdings Pty Limited v Suntrack Holdings Pty Limited [2011] NSWSC 716.

[26] Ibid, 716.

[27] Farisa Tasneem, F. "Enforceability of electronic contracts in Australia." (2015) 5.

[28] Duffy Susan and Shelton Geoff. “E-Conveyancing Simplified”. Thomson Reuters (Professional) Australia Limited (2014) 52.

[29] Lax Gianluca, Francesco Buccafurri, and Gianluca Caminiti. "Digital document signing: Vulnerabilities and solutions." Information Security Journal: A Global Perspective 24.1-3 (2015): 5.

[30] See Australian Registrars’ National Electronic Conveyancing Council, Model Participation Rules (2018) at < https://www.arnecc.gov.au/publications/model_participation_rules>

[31] Astell v Australian Capital Territory [2016] ACTSC 238.

[32] Low, Rouhshi, and Ernest Foo. "The susceptibility of digital signatures to fraud in the National Electronic Conveyancing System: an analysis." Australian Property Law Journal 17.3 (2009): 310.

[33] Ibid, 311.

[34] Ibid, 311.

[35] Conveyancing Rules (COVID-19 Pandemic) Amendment 2020, Rule 12.4.

[36] Ibid, Rule 12.4.

[37] Ravi, Vadlamani, “Advances in Banking Technology and Management: Impacts of ICT and CRM: Impacts of ICT and CRM”. IGI Global, (2007) 1.

[38] Redfield Catherine MS, and Hiroyuki Date. "Gringotts: securing data for digital evidence." 2014 IEEE Security and Privacy Workshops. IEEE, (2014) 11.

[39] Hewitson Russell. “Lawyer's Costs and Fees: Conveyancing Fees and Duties.” A&C Black (2013) 3.

[40] Ibid, 5.

[41] Ibid, 36.

[42] Ibid, 35.

[43] Ibid, 37.

[44] Ibis, 44.

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