Out-Law News | 13 Apr 2006 | 1:50 pm | 3 min. read
Portuguese bed maker J Pereira Fernandes S.A. (JPF) sought to wind-up a British retailer, Bedcare (UK) Ltd over unpaid debts. It received an email, appearing to come from Bedcare's director, Nilesh Metha, offering a personal guarantee of £25,000 if JPF agreed to adjourn the hearing for seven days. It also proposed a schedule for repaying the debt over six-months and offered a payment to account of £5,000.
JPF said that a telephone call followed in which the offer was accepted. But no money changed hands and documents that JPF sent to Metha were not returned. Bedcare was subsequently wound up.
JPF tried to enforce the personal guarantee against Metha. A district court judge accepted its argument and awarded JPF summary judgment in the sum of £24,985.53 plus costs. Metha appealed.
Metha disputed the debt owing to JPF. But that was not the focus of the appeal. Instead, the only issue for Judge Pelling QC to consider was Metha's claim that, because JPF did not produce a signed agreement or Personal Guarantee, its only claim was against Bedcare – which was now defunct.
Some laws require that documents are in writing and signed. The Statute of Frauds and Perjuries, a law dating back to 1677, puts personal guarantees among them. But the failure of seventeenth-century lawmakers to foresee the internet does not mean that such documents require a traditional, hand-written signature.
The Electronic Communications Act, passed in 2000, empowers the issuing of statutory instruments to modify any other statute to facilitate electronic communications. This has not been done for the Statute of Frauds; but nor is such subordinate legislation necessary. In 2001, the Law Commission published a paper on formal requirements for transacting electronically. It took a pragmatic view.
The Law Commission reasoned that statutes requiring signatures could be satisfied in most cases by a functional test: whether the conduct of the would-be signatory indicates an authenticating intention to a reasonable person. "Digital signatures, scanned manuscript signatures, typing one’s name (or initials), and clicking on a website button are, in our view, all methods of signature which are generally capable of satisfying a statutory signature requirement," wrote the Law Commission.
Judge Pelling accepted this view. He said that if someone had typed his name in the body of the email, that would satisfy the signature requirements of the Statute of Frauds. But in the case before him, there was no such signature.
He dismissed JPF's argument that the automatic inclusion of Metha's email address – and its appearance at the top of the email – constituted a signature. "It is the email equivalent of a fax or telex number," he wrote. "It is well known that the recipient of a fax will usually receive a copy that has the name and/or number of the sender automatically printed at the top together with a transmission time. Can it sensibly be suggested that the automatically generated name and fax number of the sender of a fax on a faxed document that is otherwise a [document covered by the 1677 Act] would constitute a signature for these purposes?"
What was missing was a name. Even initials or a pseudonym might have sufficed, reasoned Judge Pelling, "providing always that whatever was used was inserted into the document in order to give, and with the intention of giving, authenticity to it. Its inclusion must have been intended as a signature for these purposes."
Judge Pelling did not have to consider automatic signatures that email software might be set to attach to every outgoing message. But he did look at a House of Lords ruling from 1867 in which Lord Westbury said, "if a signature be found in an instrument incidentally only … the signature cannot have legal effect and force".
Judge Pelling suggested that 'incidental' in this context means "where the name or signature just happens to appear somewhere". He decided that the inclusion of an email address "is a clear example of the inclusion of a name which is incidental in the sense identified by Lord Westbury in the absence of evidence of a contrary intention."
A future court case might have to consider whether or not an automated signature footer is similarly 'incidental'.
The appeal was allowed and the application for summary judgment on the guarantee point was dismissed.