Global & Local Investments Advisors (Pty) Ltd v Fouché (SCA) (unreported case no 71/2019, 18-3-2020) (Mojapelo AJA (Navsa, Saldulker, Makgoka and Nicholls JJA concurring))

With more South Africans working from home than ever before, the importance of electronic signatures cannot be taken lightly since we live in a digital age, and most recently in an era of national lockdown where contracts or any other agreements require electronic signatures. There have been many question in the past relating to the validity and form of an electronic signature. The Supreme Court of Appeal (SCA) recently delivered a judgment on the question of what qualifies as a signature in terms of the Electronic Communications and Transactions Act 25 of 2002 (ECT Act).

The ECT Act introduced formal legal recognition of electronic commerce. In addition to this, the ECT Act stipulated that, simply because the information is in the form of a data message, it does not mean that it is without force and effect. In South Africa, ‘[t]he primary functions of a signature, includes evidencing the:

• identity of the signatory;
• intention of the signatory to sign; and
• adoption of the writing signed by the signatory

The ECT Act recognises data as the functional equivalent of writing, or evidence in writing, by guaranteeing data messages the same legal validity as messages written on paper. It states that a requirement under law that a document or information be in writing is met if the document or information is in the form of a data message and accessible in a manner usable for subsequent reference to a person who either wants to rely on the existence of a particular agreement or for record purposes.

The ECT Act defines an ‘electronic signature’ as ‘data attached to, incorporated in, or logically associated with other data and which is intended by the user to serve as a signature’. The ECT Act further provides at s 13(2) that: ‘An electronic signature is not without legal force and effect merely on the grounds that it is in electronic form’. This clearly indicates that electronic signatures are legally recognised in South African law.

Facts of the case

On 23 November 2015 Mr Fouché, a mining consultant, gave a written mandate to Global to act as his agent and invest money with Investec Bank on his behalf. The written mandate stipulated that: ‘All instructions must be sent by fax to [a designated number] or by e-mail to [a designated e-mail address] with client’s signature.’ The money was to be invested in a Corporate Cash Manager (CCM) account in the name of Mr Fouché.

Global opened the CCM accounts for its clients at Investec and then managed the accounts for a fee expressed as a percentage of the funds invested for the client in such accounts.

Two of the three e-mails containing the instructions to transfer money, ended with the words: ‘Regards, Nick’ while the third ended with ‘Thanks, Nick’. None of them had attachments. In response, Global paid out a total of R 804 000 from Mr Fouché’s CCM account to unknown third parties in three tranches as follows: R 100 000 on 15 August 2016, R 375 000 on 18 August 2016 and R 329 000 on 24 August 2016. Subsequently, Mr Fouché became aware of this and notified Global that the e-mails had not been sent by him. Mr Fouché claimed payment of the amounts transferred to third party accounts on the basis that Global had paid out contrary to the written mandate.

Global’s main submission and defence to the claim is that it acted within the terms of the mandate, on instructions that emanated from the legitimate e-mail address of Mr Fouché and that the typewritten name ‘Nick’ at the foot of the e-mails satisfied the signature requirement, when considered in the light of s 13(3) of the ECTA. Section 13(3) of the ECT Act reads as follows:

‘Where an electronic signature is required by the parties to an electronic transaction and the parties have not agreed on the type of electronic signature to be used, that requirement is met in relation to a data message if –

(a)      a method is used to identify the person and to indicate the person’s approval of the information communicated; and

(b)      having regard to all the relevant circumstances at the time the method was used, the method was as reliable as was appropriate for the purposes for which the information was communicated.’

The High Court, found in favour of Mr Fouché. Vorster AJ stated that the mandate ‘“specifically required the signature of the plaintiff [Mr Fouché] for a valid instruction and not merely an e-mail or fax message purporting to be sent …” The court below stated that this is not a case where the parties agreed to accept an electronic signature as envisaged by s 13(3) of the ECT Act. It went on to say “it is a case where the parties required a signature. No more and no less.”

The SCA per Mojapelo AJA (Navsa, Saldulker, Makgoka and Nicholls JJA concurring), looked at different definitions of signature and held, ‘[t]he Concise English Oxford Dictionary defines “signature” as “a person’s name written in a distinctive way as a form of identification or authorisation.” Black’s Law Dictionary … gives the definition of “sign” and “signature”, which read together bring us close to the legal meaning of signature.’

The court then analysed the mandate itself and held that the mandate required a ‘signature’, which in every day and commercial context serves an authentication and verification purpose. The court further held that in order to be able to resort to s 13(3) of the ECT Act, Global would have had to show that in terms of the mandate an electronic signature was required. The word electronic is absent from the mandate. The SCA accordingly held that, ‘the instruction was not accompanied by such a signature and the court below correctly held that the funds were transferred without proper instructions and contrary to the mandate.’ The court accordingly dismissed the appeal with costs.

Conclusion

As can be seen, this judgement will have far reaching consequences, providing the public with precedent in order to hold many institution, including financial institutions liable for damages suffered due to internet fraud.

It is important to note that a person must first consult the mandate (agreement) they signed with the respective financial institution. If the mandate refers to ordinary signatures and not ‘electronic signatures’, then reliance can be placed on the Global case.

This judgment also places a burden on the financial institutions to amend their agreements, so that it includes ‘electronic signatures’ as envisaged in the ECT Act.

In concluding, when drafting and entering into agreements which may be required to be signed electronically, we need to be cognisant of the manner in which draft and agree to electronic signatures being utilised, in order to avoid future disputes relating to the validity thereof.[i]

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