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79 AS DISCUSSED IN CHAPTER 2, major barriers to electronic commerce derive from statutory requirements as to form.176 In this chapter we deal with statutory requirements as to –
Barriers caused through the need for writing to be signed, for certain documents to be retained or produced in original form and difficulties with the negotiability of electronically generated documents are discussed later in this report.177
80 The statutory requirement for writing has been overcome by the enactment of section 29 of the Interpretation Act 1999 (previously section 28 of the Interpretation Bill 1997), which follows a recommendation to that effect made by this Commission in 1990.178 The 1999 Act came into force on 1 November 1999. Section 29 defines “writing” as:
includ[ing] representing or reproducing words, figures, or symbols –
(a) In a visible and tangible form by any means and in any medium:
(b) In a visible form in any medium by electronic means that enables them to be stored in permanent form and be retrieved and read.
Thus a statutory requirement for “writing” will now be met by communication through electronic means. Where the statute provides that the “writing” must be signed there is an additional impediment to overcome. By way of example, an assignment of copyright carried out electronically will not be effective unless the court can also be satisfied that it has been “signed” in accordance with section 114 of the Copyright Act 1994; likewise, a guarantee or an agreement for the sale and purchase of land will not be enforceable unless the requirement of a “signature” is met under section 2 of the Contracts Enforcement Act 1956. The issue of signature is discussed further in chapter 9.179
81 The enactment of the Interpretation Act 1999 removes the need for definition of the word “writing” in the Electronic Transactions Act. However, for completeness, we recommend that the term be included in an Electronic Transactions Act and given the meaning attributed to it by section 29 of the Interpretation Act 1999.180
82 A number of statutory provisions require documents to be posted or hand delivered. A distinction is sometimes drawn between ordinary and registered post; some statutes require service by ordinary post,181 while others require service by registered post.182
83 We do not propose to refer to all statutes which require particular forms of service; instead we will simply give examples of statutes. The principles which we identify will be applicable to all statutes which deal with those particular modes of delivery. We do not differentiate between the giving of notices and the service of documents for the purpose of this analysis.
84 By way of example, section 20 of the Credit Contracts Act 1981 provides:
20. Method of disclosure—
(1) Subject to subsections (2) and (3) of this section, initial disclosure, [guarantee disclosure,] modification disclosure, continuing disclosure, and request disclosure shall each be made by giving, or sending by post to the last place of residence or business known to the creditor or to an address specified by the person for this purpose, to each person to whom disclosure is to be made, disclosure documents that comply with section 21 of this Act:
Provided that where that place of residence or business or address is the same for 2 or more [debtors], disclosure documents given or sent to any of those [debtors] shall be deemed to have been given or sent to all those [debtors].
(2) For the purposes of sections 22 [, 24, and 24A,] when disclosure is made by sending disclosure documents to a person by post, the disclosure shall be deemed to be made to the person on the 4th working day after the day on which the documents are posted.
(3) For the purposes of sections 25 to 28 of this Act, when disclosure is made by sending disclosure documents to a person by post, the disclosure shall be deemed to be made to the person on the day on which the documents are posted.
(4) Where disclosure that is required to be made to more than one person is made to those persons on different days, it shall for the purposes of this Act be deemed to be made to all those persons on the last such day.
85 Section 20(2) deems service (for specific purposes) to be effected within a certain period from the day on which the documents are put into the post. The reason for such requirement is easy to see. There is an assumption that the document will reach the intended recipient in the ordinary course of the post. However it is unknown at what point the recipient will retrieve the document from his or her mailbox and read it. The legislature has no control over when a document may be read, but can make certain assumptions as to a reasonable time within which the document will be delivered. The assumption made is reflected in section 20(2) of the Credit Contracts Act 1981.
86 The same considerations apply equally to retrieval of mail sent electronically. In some cases, a person may not have access to his or her computer for a number of days. The person may choose not to open his or her mail or to make contact with the Internet Service Provider to gain access to the mail box. If email is to be regarded as the functional equivalent of ordinary mail then, in our view, the same safeguards for intended recipients which apply to delivery by post should apply equally to delivery by email. In terms of section 20(2) of the Credit Contracts Act 1981, for example, disclosure of documents sent electronically would be deemed to be made on the fourth working day after the day on which the email was sent.
87 There is, however, one important difference. If documents are sent by email they may be sent through the use of an application which cannot be read by the intended recipient. Obviously, if the intended recipient communicates first by electronic means, it can readily be inferred that communication through the same means is acceptable. But receipt of an email from a person does not necessarily mean that a reply, which includes an attachment which is generated through a different application, can be read.
88 To accommodate this peculiarity, it should be necessary, consistent with the choice principle, for a person who wishes to give notice or to serve documents by email, in lieu of ordinary post, to be able to establish to the satisfaction of the court both
In our view there should be no prescriptive legislation detailing how such agreement should be proved; that should be a matter left to the parties to determine. If documents are sent in lieu of statutory notice and these factors cannot be proved by the person who sent the documents then the service will be invalid. That is a risk which the person seeking to use email runs. The onus will be on the person who wishes to serve or give notice by email to prove agreement on the points raised.
89 There will usually be sanctions available against a person who has failed to comply with obligations as to service. For example, a lender who has not made disclosure under the Credit Contracts Act 1981 may, in the absence of relief being granted by the court under section 31 or section 32 of that Act, be prevented from recovering amounts otherwise extinguished by the Act.183 Another example is the failure to serve court proceedings in the prescribed manner. A judgment entered in consequence of a proceeding which has been served irregularly may be set aside as a matter of right.184 The question is whether there are any circumstances which ought properly to distinguish service by ordinary post from service by email. We think that there are. For example, while most people may, as a matter of course, go on holiday and make arrangements for mail to be collected, they may not make similar arrangements with regard to email. If service was permitted by email, in lieu of ordinary post, then there may need to be education about the consequences, particularly for consumers. For those reasons we believe proof of actual consent to receipt of notices or service by email should be required.185
90 Other statutes186 require service of documents by registered post. The use of registered post indicates that the legislature requires a higher degree of security as to service than reliance on an assumption that documents are delivered in the ordinary course of the post. As mentioned previously,187 a functional equivalent of the sending of a document by registered post would be the electronic delivery in circumstances where an electronic acknowledgement of receipt can be produced by the person offering the document in evidence.
91 In our view, if legislation sets the higher standard of service by registered post, an electronic equivalent is not appropriate, at least in the meantime. The position is similar to that which pertains to electronic signatures. Given that we are not recommending adoption of the UNCITRAL Model Law provision dealing with acknowledgements of receipt,188 it would be inappropriate to legislate for electronic receipt of information required to be delivered, by law, through registered post.
92 Questions of functional equivalence for service by ordinary post or by registered post (or, indeed, by way of delivery to a document exchange) are not dealt with in the Model Law and were not raised in ECom 1. We do not have adequate information about the likely consequences of allowing service by email (in the absence of express consent as to mode or form) as a functional equivalent of service by ordinary post. We note, however, that in its recent publication Bright Future: 5 Steps Ahead: Making ideas work for New Zealand the Government said that it was –
. . . determined to reduce the volume and complexity of the law through a general tidy-up. Over time many laws have become redundant or out of date. Government departments that administer laws will be required to conduct a cull of regulations. This will aim to remove unnecessary statutes and amalgamate laws where possible. Government wants to achieve a 12–25% reduction in the number of regulations over the next 12 months.189
In our view a review of all statutes and subordinate legislation in which service by ordinary post and registered post is required should be conducted as part of that review, so that decisions can be made on whether to permit service by email as a functional equivalent. In the meantime we would recommend, as an interim measure, that service by email could be effected where service by ordinary post would be sufficient if there is express consent personally signed in a paper form which consents both to receipt of notices by email and confirms ability to receive electronic transmissions through the application which will be used to send them. This provision would enable those who wish to do all business by email to do so without fear of unintentional, yet adverse, legal consequences.190
93 Where a statute requires documents to be delivered personally an even higher standard of security is required in relation to proof of receipt. Service of court proceedings is an obvious example. In our view such requirements should remain and, at least at this stage, not be given any electronic equivalent as a matter of law. It should be open, however, for parties to designate an electronic means of receiving documents (whether by facsimile or email) once steps have been taken in relation to court proceedings.191
94 Certain statutes require things to be done in the presence of a human being. They can also require things to be done at a physical location. An example of the former requirement is the need for affidavits to be witnessed by persons who see the deponent swear that the content of the document is true and correct.192 An example of the latter requirement is statutory provisions requiring certain information to be displayed at registered offices. For instance, licensed auctioneers and motor vehicle dealers must display prominently at their place of business and all branch offices a notice with the name and licence details of the auctioneer or dealer.193
95 The Government has recently moved to facilitate the ability of licensed motor vehicle dealers to sell cars directly over the internet. Initially, section 54(1) of the Motor Vehicle Dealers Act 1975 provided that no licensed dealer may carry on business at any place other than the place of business named on the licence (or a branch or subsidiary office) but, by section 8(1) of the Motor Vehicle Dealers Amendment Act 1999, which came into force on 13 September 1999, the Act was amended to allow a licensee to conduct its business at any place while continuing to require the licensee to have at least one place of business at which appropriate notices could be posted.194 The amendment was prompted by a dispute between Korean carmaker Daewoo and the Motor Vehicle Dealers Institute regarding the “Daewoo Direct” programme for selling cars via an 0800 toll-free number.195
96 By way of contrast, the Auctioneers Act 1928 has changed little since its enactment.196 Nobody in 1928 could have contemplated the modern situation whereby “auctions” take place online197 with the auctioneer and bidders located not only in different rooms or buildings, but often in different countries. Online auctions can take various forms, but one example is where an airline posts a minimum bidding price for a ticket on its website, and a person seeking to purchase it specifies or “bids” the price he or she would be willing to pay for that ticket. The airline then tries to meet this price in order to sell an otherwise empty seat; the higher the bid, the more likelihood of a seat.198 Unlike an auction in the physical world, where the “reserve” selling price is not usually known unless it is reached, the bidder knows the minimum price the airline will accept for the ticket before the auction starts.
97 While the Auctioneers Act 1928 does not actually require that the auctioneer and bidders be physically present during an auction in so many words, this requirement seems implicit from the section 2 definition of “sales by auction”.199 The critical part of the definition is the use of the word “outcry” which is, itself, defined by section 2 of the Act as including
any request, inducement, puff, device, or incitement made or used by means of signs, speech, or otherwise in the presence of not less than 6 people by any person for the purpose of selling any property . . . .
98 Whether online auctions fall within the regulatory scheme provided in the Auctioneers Act 1928 depends on whether the acceptance of an online bid is considered to be “made or used by means of signs, speech or otherwise in the presence of not less than six people . . .” in accordance with the definition of “outcry” in section 2. Under a literal interpretation, the acceptance of an online bid could be considered to be made “by outcry” if six other people were huddled around the auctioneer’s computer at the relevant time. However it does seem possible that a court would consider that sales where the auctioneer and bidders are in separate locations could never have been intended to be covered by the Auctioneers Act 1928.
99 When construing the definition in section 2 a court is likely to take into account the policy reasons for requiring the presence of six other people, and consider whether these reasons could be satisfied within the electronic environment. Possible reasons for the requirement could be to ensure a fair auction process, or to provide a certain level of competition in the bidding. A court is likely to consider whether these requirements could be met in an online bidding situation when determining if the definition of “outcry” is met.
100 While there have been very few cases that deal with the relevant provisions of the Auctioneers Act 1928, in National Australia Finance Ltd v Tolra200 Master Williams QC (as he then was) seemed to accept that it would be legally impossible under the Act to hold an auction with less than six people present.
101 It is undesirable that statutes which were designed to meet particular needs in earlier times should operate in a manner which may discourage electronic commerce. In each case it will be necessary to identify the particular policy issues which required the restrictions at the time the legislation was enacted and then to determine whether those policy considerations can be met in the electronic environment. An additional question is, of course, whether the policy reasons are still justified. It seems to us that it is entirely undesirable for a person conducting an auction online to be unsure whether he or she is conducting a valid auction. We recommend that urgent attention be given to this particular matter by the Ministry of Commerce which, we understand, has already embarked upon some work in this area. The speed with which the Government reacted to the problems caused by the way in which the Motor Vehicle Dealers Act 1975 was framed, indicates that it is appropriate to reconsider these issues promptly.
102 We have already recommended that various government agencies responsible for the administration of legislation should carry out a review of all legislation under their control to see whether that legislation is likely to discourage electronic commerce. Given that the underlying rationale for requiring physical presence or attendance will vary markedly from statute to statute, we believe it is neither appropriate nor desirable to seek to amend existing laws through the enactment of a generic statute dealing with electronic transactions. We remain happy to assist other ministries or agencies in reviewing this area of law.
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URL: http://www.nzlii.org/nz/other/nzlc/report/R58/R58-5.html