The Reynolds Report – December 2019

The Reynolds Report – December 2019

In a recent decision (Neocleous v Rees [2019] EWHC 2462 (Ch)) HHJ Pearce (sitting in the County Court at Manchester, Business and Property Work) accepted that, in light of modern communication practices, the definition of signature had ‘evolved’ sufficiently for a string of email communications with various automatically generated footers containing details of the solicitors for the parties to constitute a contract ‘signed by or on behalf of the parties’ and thus satisfy the requirements of Section 2(1) of the Law of Property Miscellaneous Provisions Act 1989 (“the 1989 Act”)

Mr and Mrs Neocleous (Mr & Mrs N) owned a piece of land in the Lake District – Louper Weir. The Western boundary of Louper Weir was a lake, the Eastern boundary a road – the A592.

Ms Christine Rees (Ms R) owned an area of woodland (Wilders Wood) next to Louper Weir on the other side of the A592. Ms R also owned a small jetty and landing area (‘the Landing Plot’) on the eastern bank of the lake, entirely within Louper Weir.

The only way to gain access to the Landing Plot by land was across Louper Weir. A corresponding right of way (for various purposes) appeared in the Land Registry Entries for Wilders Wood (and, one would presume, for the Landing Plot) but no such right appeared in the Registry Entries for Louper Weir.

Mr & Mrs N and Ms R had been in ongoing dispute/correspondence about the issue for some time and had each instructed solicitors to represent their respective interests:
Daniel Wise of Salter Heelis (Mr W) for Mr & Mrs N; and
David Tear of AWB Charlesworth (Mr T) for Ms R.

Matters had gone as far as proceedings in the First Tier Tribunal. The proceedings were adjourned on the basis of an exchange of emails between Mr W and Mr T in which a settlement appeared to have been reached. Ms R would buy Louper Weir for £175,000 (in full and final settlement of all liabilities including any liability for costs of the Tribunal proceedings).

Before an order formalising the settlement could be drawn up however Ms R, acting through Mr T, sought to reopen the Tribunal proceedings. She argued that settlement had not been finalised.

Mr & Mrs N applied to the High Court seeking an order for specific performance of the contract which they argued existed. Ms R counter argued that – even if the string of emails between Mr W and Mr T amounted to a fully formed agreement (which was, eventually, admitted) – they did not satisfy the requirements of s2(1) the 1989 Act and hence did not constitute an enforceable contract for the purchase of land.

S.2(1) the 1989 Act provides:
(1) A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all of the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each.
….
(3) The documents incorporating the terms or, where contracts are exchanged, one of the documents incorporating them (but not necessarily the same one) must be signed by or on behalf of each party to the contract.

It having been accepted that the string of emails passing between W and T over several days in March 2018 could constitute ‘one document’ in the relevant sense, debate focused on whether this ‘document’ had been signed by or on behalf of the parties. The names of the solicitors involved (and other details) appeared as automatically generated ‘footers’ in various emails making up the chain but was this sufficient for the purposes of s2(3) the Act?

Reference was made to explicit provision in recent legislation and regulations (Electronic Communication Act 2000, Electronic Identification, Authentication and Trust Services Regulation 910/2014 etc – all of which contemplate the possibility of electronic ‘signatures’) that they do not affect existing national or EU law related to the conclusion and validity of contracts. Note was also, however, taken of the view expressed by the Law Commission in Consultation Paper No 237 (“Electronic Execution of Documents”) that a review of recent case law demonstrated that electronic signatures have been found to satisfy a statutory requirement for a signature where there is ‘evidence of an intention to authenticate the document.’

Great weight was also put, by the Court, on the consideration that in Microsoft Outlook (and, presumably, other email management packages) automated ‘footers’ of the type referred to above (containing names and contact details for solicitors and law firms) are referred to as ‘signatures.’ (This, as a piece of logic, is right up there with the idea that a small text file created by a website and stored in the user’s computer to provide a way for the website to recognise you and keep track of preferences is something you can dip in a mug of tea because it is called a ‘cookie.’)

In the end however the Law Society’s interpretation appears to have won out and the judge made – on the basis that the various automated attachments made the string of emails a ‘signed’ contract, for the purposes of s.2 the 1989 Act and hence binding – an order for specific performance of the contract.

A sensible outcome, some might say…

Those of you with longer memories will however remember that s.2 the 1989 Act was enacted to replace and make more rigorous the requirements of s.40 of the Law of Property Act 1925. The intention was to eliminate any subjective element from the requirements for a binding contract for sale of land (and, no doubt, to cope with the increased volume and variety of purportedly official documents being generated by the mid/late 1980s when compared to the 1920s).

To the unlearned eye it would seem that introducing a position that an automated attachment to a string of electronic correspondence can satisfy the requirements of s.2 the 1989 Act provided that there is ‘an intention to authenticate’ would seem to undo all of this work. It re-creates the need for extraneous evidence.

What the Court was attempting to achieve in the above case would seem to have been fairly clear. It appears even to have been conceded by Ms R (or on her behalf) that she was attempting to resale from an agreement based on a technicality.

It must however be suggested that this could have been achieved without watering down the requirements of s.2 the 1989 Act.

Disputes relating to land are frequently settled on the basis of compromise agreements (and/or Orders) which do not fully meet the requirements of s.2 the 1989 Act – with the idea that the parties will then cooperate (and will have the necessary time) to prepare the formal documentation required to bring the settlement into effect.

When one party fails to cooperate the remedy then is to go back to the Court (or Tribunal) and seek provision requiring them to do so (and/or sanction in costs) – not to exhume the correspondence leading up to the settlement and seek to argue (bending, if necessary, the relevant statutory requirements) that this correspondence itself constitutes a contract satisfying s.2 formalities.

It would appear (again to the unlearned eye) that seeking, instead, to resolve such a position by ‘re-interpreting’ the requirements of s.2 the 1989 Act (and, at the same time, introducing a subjective element into those requirements) poses a strong risk of throwing the baby out with the bath water.

The generation of typed, apparently official documents has become even easier now than it was back in 1989. It would seem, then, that the risks which s.2 the 1989 Act was introduced to address have increased rather than diminished.

Diluting the requirements of s2 to allow people to rely on chains of emails with multiple automatically generated footers to constitute a binding contract (provided there is the necessary ‘intention’) would appear – particularly given the apparent urge on the part of many (including professional advisers) to reduce email to something more akin to a text message service than formal correspondence – a risky path to take.

Further developments will no doubt follow.

Merry Christmas to everybody and a happy New Year.

MARTIN REYNOLDS
BARRETT & CO
DECEMBER 2019

Further reading

Reynolds Report November 2019 – Talk to Your Accountant, now 

Reynolds Report October 2019

I’m selling my business, why do I need a solicitor? – Reynolds Report

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