By Sharon Christensen

Sharon Christensen is the Gadens Professor in Property Law at the Queensland University of Technology. She is a consultant to Gadens Lawyers, Brisbane and has published many books and articles on property law. She is a member of the QLS Property Committee and Specialist Accreditation for Property Law Committe and is a co-author of the Queensland Conveyancing Protocol. She is currently a member of a government reference group advising on changes to the Land Sales Act. Here she discusses the changes to conveyancing in Queensland and the move toward a national e-conveyancing system following the enactment of the Electronic Conveyancing National Law (Queensland) Act.

The enactment of the Electronic Conveyancing National Law (ECNL) in Queensland is an important milestone in the journey toward a national e-conveyancing system. Queensland is the third jurisdiction to adopt the law after NSW and Victoria. It is anticipated that all states will adopt or re-enact the ECNL during 2013–14. The objective of the national approach is to promote efficiency throughout Australia in property conveyancing by providing a common legal framework. Importantly, the fundamental principles of the Torrens system, including indefeasibility, remain unchanged.

An electronic lodgment system will substantially change the way a conveyance is conducted. The system will enable lodgment of electronic data for the registration of transfers, mortgages and releases of mortgage, caveats and settlement notices, as well as online financial settlement and lodgment of documents. Electronic settlement and lodgment require different rules to support new mechanisms, such as digital signatures and new processes, such as lawyers signing transfers for their clients. The ECNL establishes an overarching framework that supports the creation of further rules and contracts that regulate the operators and users of the electronic system.

The key provisions of the ECNL are explained below together with relevant changes to conveyancing practice arising from the provisions of the national law.

Electronic Conveyancing National Law

The purpose of the ECNL is to establish the legal framework for electronic conveyancing that will be supported by the relevant land title legislation in each jurisdiction and the rules approved by the registrars through the Australian Registrars National Electronic Conveyancing Committee (ARNECC). There will be two different rules. First the Model Operating Rules (MOR), which will govern the conduct of the operator of an electronic lodgment network; and, secondly, the Model Participation Rules (MPR), which will govern the conduct of subscribers to the electronic lodgment network.

Provision is made in the ECNL for:

• the electronic lodgment of data in the Land Registry;
• the signing of electronic instruments with digital signatures;
• subscribers to obtain client authorisations, empowering a subscriber to act for, and sign on behalf of, the client in the system;
• the establishment of electronic lodgment networks and approval for persons to operate them;
• the establishment of operating requirements and participation rules; and
• compliance examinations by registrars to ensure compliance with the operating requirements and the participation rules.

The ECNL was adopted as a law of Queensland on 17 May 2013 in the Electronic Conveyancing National Law (Queensland) Act 2013, which also affected a number of consequential amendments to the Land Title Act 1994.

Electronic instruments (ss 7, 8 & 9)

Paper-based instruments will no longer be required for the transfer of a lot, mortgage or release of mortgage. Instead, the necessary data will be provided electronically to the land registry. Section 7 of the ECNL provides for the submission of documents electronically via an Electronic Lodgment Network (ELN) in a form approved by the registrar. It should be noted that “document” is defined for the purposes of the national law as including “any record of information that exists in a digital form and is capable of being reproduced, transmitted, stored and duplicated by electronic means”. This means that an electronic instrument can be constituted wholly of data in a computer.

If a document is lodged electronically in accordance with s 7, the registrar must receive and process the document in accordance with the land titles legislation. Once submitted electronically, the document will have the same status as a paper document (ECNL, s 9). This means that there will be no difference between the legal effect of an electronic document and a paper document lodged for registration. In each case, the electronic conveyancing document once registered will be a registered instrument under the Land Title Act 1994 and the acquiring party will obtain the same benefits of registration under that Act, including that the registered instrument takes effect as a deed (Land Title Act 1994, s 176).

This means that for a sale transaction the transfer documents will no longer be created in paper. Relevant data, similar to the information required for a transfer and form 24 will be entered into a workspace in the electronic system. There will be no requirement to generate a paper version of the documents for signing. The seller will be able to sign the documents digitally by accessing the system, as discussed below.

Client authorisations (ss 10 & 11)

Before signing a transaction electronically, a lawyer will need to obtain a client authorisation in accordance with s 10 of the ECNL. A client authorisation sanctions a lawyer to do a number of things on behalf of the client to enable the transaction to be completed electronically, including signing electronic documents for registration and authorising and completing the financial transaction (s 10(1)(b)). The client authorisation agreement should be in the approved form set out in Sch 4 of the MPR and is separate to the lawyer’s retainer agreement.

The client authorisation is not a power of attorney and only has effect for the actions specified in the agreement (s 11). This means that the power of attorney provisions in the Powers of Attorney Act 1998 and the Land Title Act 1994 (related to registration) will not apply.

A properly completed client authorisation agreement will be deemed to comply with laws related to the execution, signing, witnessing, attestation or sealing of documents. To be properly completed the lawyer should ensure that all parts are completed and that the lawyer has taken reasonable steps to:

• establish the client is entitled to be entered into the conveyancing transaction (MPR, r 6.4); and
• verify the identity of the client (MPR, r 6.5).

Digital signatures (ss 9 & 12)

Who can sign electronically?

Electronic documents may be digitally signed by a person who is designated as a “signer” for the subscriber. A subscriber is required to have a minimum of one digital signature certificate that uses public private key technology. A subscriber should designate at least one person to act as a signer within the system. The subscriber must comply with any jurisdiction specific rules in relation to the conduct of conveyancing transactions when appointing a signer (MPR, r 6.7). For example, in Queensland a subscriber will need to nominate an Australian legal practitioner as a signer within the system.

What is the effect of signing by a subscriber?

Only subscribers to the system will be able to access the system and sign documents. Once an electronic instrument is signed by a subscriber the ECNL deems it to:

• be in writing for the purposes of every other law of the jurisdiction (s 9(3));
• satisfy other laws of the jurisdiction related to execution, signing, witnessing, attestation or sealing of documents. Therefore, in an electronic system there will be no requirements for witnessing (s 9(3)); and
• be signed by the subscriber’s client where the subscriber is acting under a client authorisation agreement or by the subscriber in all other cases (s 9(2)).

The signer also makes a number of certifications as set out in Sch 3 of the MPR. These certifications relate to verifying identity, client authorisation, supporting evidence, that the information in the document is correct and that any duplicate certificate of title is destroyed or retrieved.

What is the “attribution rule”?

ARNECC is of the view that a strong attribution rule is necessary to protect the integrity of the electronic system and to give subscribers comfort that they can rely upon instruments signed by other subscribers. Section 12 of the ECNL provides for a subscriber to be bound by the use of their digital signature unless the subscriber can repudiate the signature in accordance with s 12 of the ECNL. The following rules apply regardless of who created the digital signature of the subscriber and the circumstances of its creation:

• the document is deemed to be signed by the subscriber;
• the signature is binding on the subscriber and any other person who the subscriber is acting for under a client authorisation; and
• the signature may be relied upon as the signature of the subscriber by each party to the transaction, each subscriber acting under a client authorisation, any person claiming under or through any party to the transaction and the registrar once the document is lodged (s 12(1)).

The only exception to these principles is when the subscriber repudiates the signature. A subscriber will be able to repudiate a signature if the subscriber establishes the requirements of s 12(4) of the ECNL:

• the digital signature was not created by the subscriber; and
• the digital signature was not created by an employee, agent, contractor or officer of the subscriber who at the time had the subscriber’s express or implied authority to create the signature; and
• the creation of the signature was not enabled by a failure of the subscriber or their agents, employees, officers or contractors to comply with the requirements of the participation rules or a failure to take reasonable care.

The attribution rule has been criticised by a number of stakeholders as resulting in liability for a subscriber in the event of fraud by an employee or a third party who obtains the ability to sign as a result of the negligence of an employee. These observations are accurate, but the opposing view is that such attribution is necessary to ensure the integrity of the system. It means that a subscriber must maintain the security of their digital key by ensuring proper security for their own computing systems and protocols for employees authorised to sign on their behalf.

Electronic lodgment networks (ss 13 to 21)

An electronic lodgment network (ELN) is an electronic system that enables the lodging of registry instruments and other documents in electronic form for the purposes of the Land Title Act 1994 (ECNL, s 13(1)). An ELN may also enable the preparation of registry instruments and other documents in electronic form for lodging in the land title registry. Under s 14 of the ECNL, the registrar of titles in any jurisdiction may operate an ELN, but this is unlikely given the desire for a national system.

Third parties may operate an ELN only with the approval of the registrar in the relevant jurisdiction: s 15 of the ECNL. It is anticipated that the first ELN will be PEXA (Property Exchange Australia) and it will be operated by the National E-Conveyancing Development Ltd (NECDL). PEXA will be a web-based property exchange, similar to the ASX, which will allow parties to a conveyancing transaction to prepare land title instruments, settle the transaction and lodge instruments for registration electronically. There is no proposal for PEXA to alter the data held by a land registry directly, or to create a national land registry, but the system will include a financial settlement component allowing the transfer of settlement monies electronically. Subscribers will be required to enter into participation agreements with NECDL to use the system.

An entity may only be approved as an ELN operator (ELNO) if it meets the criteria set out in the MOR. Sections 16 to 21 of the ECNL deal with the approval of an operator, conditions of approval, suspension, revocation, renewal and operating rules for an operator.

Operating and participation rules (ss 22 to 27)

Sections 22 to 27 provide the broad framework for the creation of operating rules governing the conduct of an ELNO and participation rules regulating the conduct of subscribers to the system. The registrars agreed through ARNECC to publish model rules. According to the ECNL, each registrar will have regard to the model rules when establishing the rules for individual jurisdictions (ECNL, s 24). The types of matters the rules are able to regulate are not limited by the ECNL but possible content is listed in ss 22 and 23. The model operating and participation rules have been released and are available on the ARNECC website (http://www.arnecc.gov.au/).

Subscribers are required to comply with the participation rules applying in the particular jurisdiction in relation to the use of the ELN. The registrar of titles is able to restrict, suspend or terminate a subscriber’s use of an ELN where there is a contravention of the rules. Alternatively, the registrar may direct the ELNO to restrict suspend or terminate the subscriber’s use (ECNL, s 26). The powers in s 26 of the ECNL are in addition to any rights the registrar or and ELNO may have under the participation agreement, the participation rules or any other law (ECNL, s 26(3)).

Next steps

PEXA will commence operation in June 2013 for the lodgment of discharges of mortgage with the Victorian Land Registry and one major bank. Registries in NSW, QLD and WA will progressively be joined to the system during 2013 together with other banks and financial institutions. Lawyers and conveyancers will be able to join the system in release 2 later in 2014.

Sharon Christensen, Editor Conveyancing Manual Queensland

Conveyancing Manual Queensland will be responding to this major change by providing comprehensive commentary and guidance on these changes.