A giant leap - 2

A SMALL STEP IN ELECTRONIC SIGNATURE - A GIANT LEAP FOR ELECTRONIC DEEDS REGISTRATION

I have read articles reporting on the welcome acceptance of a Power of Attorney to transfer land, signed using an Advanced Electronic Signature, by the Registrar of Deeds in Bloemfontein. I have also read with disappointment and surprise the comments that the report sparked - [see A giant leap and the comments thereunder]. 

The headline to the report is perhaps misleading by signalling an “electronic registration”. The first line of the report indicating that the “…deeds office registered its first electronically signed property transfer” is also an overstatement. A reading of the article, however, clarifies that the Power of Attorney was signed electronically using an Advanced Electronic Signature (AES), a printout of the Power of Attorney certified in terms of Section 15(4) of the Electronic Communications and Transactions Act (ECT Act), thereafter lodged with and accepted by the Registrar.

The failure of the article to accurately headline the detail of what occurred must not be allowed to detract the critical significance of this development for conveyancing in South Africa or the lawfulness of the registrar accepting the printout. This is not a trivial nor, as one commentator termed, a “premature” step. On the contrary exploring how we can lawfully use modern technology in conveyancing is long overdue. Indeed, the solution providers and attorneys should be congratulated on their initiative and the Registrar applauded for playing a part in this breakthrough step, for the reasons set out in this article.

Socio-Economic Imperative
Only those that are not paying attention will argue that land reform is not a critical socio-economic and political issue. One of the many challenges that we must address is the delivery of rights in land to citizens. Achieving this goal is absolutely dependent on an efficient, secure and cost effective deeds registry system.

In essence the deeds registry is a large information system and it would be foolish to continue to ignore the benefits that modern technologies hold in the processing of information. As a profession, the indisputable duty of which is to serve the well-being of all South Africans, we must recognise and accept responsibility of our role in fulfilling the duty to optimise the security, efficiency and cost benefits that can be unlocked by using information and communications technologies in the provision of legal and administrative services. This includes preparing, processing and ultimately the registration of deeds.

To some this may seem terrifying but the home-grown example of the de-materialising share certificates and the re-engineering of the registration of shares traded on the JSE as well as the payment mechanisms employed, are evidence that this can be done successfully if tackled correctly and with a will that has been unfortunately lacking up to now.

Brief History of the Electronic Deeds Registry System Concept
With great foresight the then Chief Registrar of Deeds, Mr Jan Slothouber, formed a task team to address the issue of an Electronic Deeds Registration System (EDRS) as long ago as 1996. I had the privilege of working on that task team and in 1999 the team provided detailed recommendations on how to address the transition to electronic deeds registration. Regrettably, despite the significant work and value of what was considered the recommendations made were, for reasons that remain opaque to me, not accepted or actioned by the powers that be. I am not suggesting that some 18 years later newer technologies (Blockchain springs readily to mind) would not provide solutions that would achieve the desired outcomes more elegantly than contemplated in the late part of the last century. Indeed many solutions such as digital signatures (as opposed to digitised signatures) have developed significantly and the legal clarity that the ECT Act brought some years after the recommendations were tabled was, at the time of the task teams deliberations, absent. Despite this the conceptual framework remains as relevant today as it was then.

In 2016, consideration of EDRS was resurrected in the initial Electronic Deeds Registration Bill published for comment by the Minister of Rural Development and Land Reform. After initial consultation it was acknowledged that the approach reflected in the Bill was flawed and the Bill was re-drafted to allow for a more consultative process that one hopes will incorporate the interaction of all information systems pertinent to deeds registration, including the integration of information systems that are and will in the future be used by conveyancers

Signatures
At the core of the conceptualisation of an EDRS by Mr Jan Slothouber’s task team was the recognition that signatures, confirming various checks and stages in the process as well as the endorsement or execution evidenced by signatures, would in an EDRS require secure electronic signatures. I hasten to point out this was before the development and enactment of the Electronic Communications and Transactions Act in 2002 (ECT Act) and definition of Advanced Electronic Signatures (AES). The use of reliable signatures as stipulated in the laws of other countries guided the consultations at that time.

The ECT Act introduced AES, which are digital signatures, the issue and use of which is governed by a Certification Authority (CA) adhering to and enforcing internationally accepted rules and standards. Where the CA wishes to provide AES the ECT Act and regulations require that the operation of the CA is overseen by an Accreditation Authority (a statutory body established in the ECT Act) and that the CA’s operations are subject to stringent and regular audit.

The ECT Act expressly stipulates that where a signature is required by law, as is the case with signatures that are core to the deeds registration process, an AES must be used.

By the nature of digital signatures (and AES) they enable the “locking” of electronic information to which the signatures are applied in the manner that any tampering with the signature or the text (data) to which the signature is associated will immediately be detectible. Because of this feature many of the time consuming and expensive checks that have been developed to ensure security of our current deeds registration system can be eliminated, leading to a far more efficient, cost effective and secure system, than is currently the case. These benefits simply cannot be ignored.

Thus, while some may be tempted to trivialise the importance of the acceptance a Power of Attorney signed using an AES, it is a significant leap towards the ultimate goal of the development of an EDRS.

Lawfulness of Electronic Signatures
The sections of the ECT Act relevant to the legal recognition and facilitation of electronic transactions (Chapter III) are based on the United Nations Commission on International Trade Law (Uncitral) Model Laws on Electronic Commerce and Electronic Signatures. These model laws have informed and shaped evolving legislation globally and assisted governments if facilitating the development of law governing the use of information and communications technologies. Thus, it can be accepted that the principles in the ECT Act reflect a universal understanding of how electronic communications and transactions should be dealt with.

Central to the model laws and Chapter III of the ECT Act is the concept of functional equivalence. It is recognised that the rules governing the use of paper and text, because the media is so different to electronic communications and records, must be different if they are to achieve the functions designed to safeguard the integrity of what was initially written and what is read at a later time.

In dealing with land transactions appropriate information security management systems governing how we use the technologies are critical to the integrity of systems that may be established. That is why the Uncitral Model Laws and our ECT Act are underpinned by the recognition that security measures applicable to paper and text-based systems will not be identical. Understanding the safeguards introduced by the ECT Act requires an understanding of the functional equivalent requirement on which the law is based.

“Reliable signatures” as they are termed in the model laws, have certain characteristics. These require that the electronic signature identify, is linked to and is under the sole control of the signatory. In addition any change to the signature or data to which the signature is associated must be detectible. These principles with the addition of face to face authentication (which facilitates the first two requirements of identity and linking the signature to the signatory) are requirements for an AES in our law. This fulfils and exceeds the functional equivalent requirement and the requirements that our law and practice previously developed governing hand written signatures over many centuries.

The ECT Act itself has as its objectives, among other, to:

• Recognise the importance of the information economy for the economic and social prosperity of the Republic;
• Remove and prevent barriers to electronic communications and transactions in the Republic;
• Promote legal certainty and confidence of electronic communications and transactions; and
• Develop a safe, secure and effective environment for the consumer, business and the government to conduct and use electronic transactions

The Act goes on to state in the Interpretation provision:

“This Act must not be interpreted so as to exclude any statutory law or the common law from being applied, recognising or accommodating electronic transactions, data messages or any other matter provided for in this Act.”

The ECT Act is imperative in the statement of its objects and the fact that we must not create barriers to the use of electronic solutions that pervade our 21st century lives. The use of electronic information where it can be used is both supported by our law and indeed it may well be unlawful to prevent its use.

Criticism
While I accept that the article reporting the use of AES to sign the Power of attorney may have been penned with greater clarity, I remain somewhat astonished by the comment and criticisms that have been raised.

In the first instance the lawfulness of the acceptance of the printout of the Power of Attorney signed using AES and duly certified in terms of section 15(4) of the ECT Act is questioned. One commentator has indicated this is in contravention of RCR50/2006, which states:

“Only originally signed documentation is permissible.”

In 2006, although the issue of AES was addressed in the Act, the Regulations governing the accreditation of providers of AES had not yet been published and no providers of advanced electronic signatures had been accredited. The necessity for the ruling can be understood as in 2006 no “secure” signatures meeting the requirements in the ECT Act were available. This, however, changed in 2012 when Regulations had been published, the first AES provider was accredited and AES became a practical reality. Aside from anything else in terms of the ECT Act an electronic record signed using an AES (which locks the document so no changes can be effected) is an original and is signed therefore it meets all of the requirements of the resolution. It is submitted that any failure by a Registrar to accept the use of an electronic transaction or communication that complies with the ECT act where the Registrar is in a position to do so, would be unlawful. I certainly cannot see how a resolution (particularly a very outdated resolution) binds the Registrar to a patently unlawful action.

While I do not believe that social media is an appropriate forum to debate this issue, I would be more than happy to engage with representatives of the legal profession, the Office of the Chief Registrar and the Department of Rural Development and Land Reform, as I am confident that it can be shown indisputably what has been done by the solution provider, the attorney and the Registrar is perfectly lawful and must be accepted as a primary step to progressing our move to an EDRS in time. Only those opposed to progress and the need for the enhancement of our Deeds Registry system to meet the socio- economic necessity outlined above would argue otherwise.

A further criticism or observation that has been made is a challenge as to whether the signature of a power of attorney electronically renders this part of the process “hassle free”. In this regard I believe what has happened should be seen for what it is. It is one of the many steps that can ultimately unlock the potential for EDRS that will undoubtedly benefit all stakeholders. Indeed, the observation is made by the commentator that the delays in the process of transfer of land really relate to obtaining rates clearance certificates. It is ironical therefore that there is a lack of recognition for the huge efforts that have been made by the solution provider in using advanced electronic signatures as part of the solution to facilitate and speed up obtaining rates clearance certificates. Indeed the information that I have is that where local authorities have implemented electronic rate clearance technologies the overall reduction in the time between instruction and registration is significant. The outcry from all stakeholders when the Chief Registrar of Deeds threatened to discontinue this practice in late 2015 was profound, as were the efforts of the solution provider in assisting the profession to avert what was regarded as a crisis. It should also be noted that the acceptance by registrars of printouts of rates clearance certificates signed using AES is identical in principle to the acceptance by a registrar of a printout, duly certified, of a Power of Attorney signed using AES.

Finally, one of the commentators has warned that this is a step in a process to eventually take conveyancing work away from conveyancers. He notes that he is “all for technical innovation but that he has an uneasy feeling in his gut.” My comment as an attorney of 37 years and a practicing conveyancer for much of that period, is that the profession has doggedly resisted change and the proper adoption of technology to its own detriment. I also believe implicitly that conveyancing should remain the domain of the profession. I question, however, whether if we are the barrier to inevitable and much needed change whether we deserve that “entitlement”.

Conclusion
Change is by its nature disruptive and we are living in a time that has seen unprecedented change and disruption. Through most of my professional career been seized with the practical and legal implications of the introduction of modern technologies and the disruption it inevitably causes, I recognise and advocate the need for an evolutionary and careful approach in the implementation of changes to a system as fundamentally important as our deeds registry system.

The small step of replacing a paper document with an electronic document, and a pen signature with an equivalent electronic one is indeed a Giant Leap for the industry. In the context of the signing of a Power of Attorney and its printout for lodgement in the deeds office it is a small step in optimising the process that holds no risk for the integrity of the deeds registration system. It is nonetheless significant in its recognition of law that influences the inevitable transition from paper documents to electronic records.

As a profession that has proved to be resistant to change as opposed to embracing change even where there are demonstrable benefits the question that we need to ask ourselves is: Do we wish to protect and maintain institutions and systems which are beyond their “sell by date” because it is convenient for the profession to do so, or do we wish to support the development of systems that will benefit not only the profession but also the society we are obliged to serve?

Mark Heyink
Mark Heyink Attorneys