A giant leap for electronic deeds registration

31 August 2018 8:56am
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Recently a transaction occurred in which a Power of Attorney to transfer land, prepared electronically, was signed by the transferor using an Advanced Electronic Signature (AES).

A printout of the Power of Attorney was certified in terms of Section 15(4) of the Electronic Communications and Transactions Act (ECT Act) and thereafter lodged with and accepted by the Registrar of deeds in Bloemfontein.

While this is a development of critical significance for conveyancing in South Africa, it has attracted criticism from some quarters of the conveyancing field. The lawfulness of the acceptance of the printout has been questioned and the transaction has even been termed a “premature” step. This is disappointing, because exploring how we can lawfully use modern technology in conveyancing is long overdue. Indeed, the solution providers and the attorneys, Neumann van Rooyen Attorneys in Welkom, 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 not paying attention will argue that land reform is not a critical socio-economic and political issue. Among the many challenges we must address is the delivery of land rights to citizens. Achieving this goal is absolutely dependent on an efficient, secure and cost-effective deeds registry system.

The deeds registry is a large information system and it would be foolish to continue ignoring the benefits that modern technologies hold in processing this information. As a profession whose indisputable duty is to serve the well-being of all South Africans, we must recognise and accept responsibility in optimising 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 registering 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, then Chief Registrar of Deeds, 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 team. In 1999 we 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 were not accepted or actioned by the powers that be. I am not suggesting that some 18 years later newer technologies (Blockchain springs 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. The Electronic Communications and Transactions Act ECT Act of 2002 (ECT Act) also brought legal clarity that was absent when the recommendations were tabled. 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. 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 those 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, as they do, 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 ECT Act and the definition of AES, or digital signatures. The use of reliable signatures as stipulated in the laws of other countries guided the deliberations at that time.

The ECT Act introduced AES, the issue and use of which is governed by a Certification Authority (CA) adhering to and enforcing internationally accepted rules and standards. 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 also stipulates that where a signature is legally required, as is the case in the deeds registration process, an AES must be used.

Digital signatures (and AES) enable the “locking” of electronic information in a way that any tampering with the signature or data will be immediately detectible. Thus, many of the time-consuming and expensive checks developed to ensure the security of our current deeds registration system can be eliminated, leading to a more efficient, cost effective and secure system. These benefits cannot be ignored.

While some may be tempted to trivialise the importance of the acceptance of 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, which have informed and shaped evolving legislation globally and assisted governments in 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, which are so dissimilar to electronic communications and records, must be different if they are to achieve the functions that 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 suffice. Understanding the safeguards introduced by the ECT Act requires a comprehension 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 is linked to and under the sole control of the signatory. Any change to the signature or associated data must also 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 as well as the stipulations that our law and practice previously developed governing handwritten signatures over many centuries.

The ECT Act itself has as its objectives, among others, 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 modern lives. The use of electronic information is supported by our law. Indeed, it may well be unlawful to prevent its use.

Criticism

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 has been questioned and said to be in contravention of RCR50/2006, which states:

“Only originally signed documentation is permissible.”

Although the issue of AES was addressed in the ECT Act, the Regulations governing the accreditation of providers of AES had not yet been published in 2006 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 changed in 2012 when Regulations were published and the first provider was accredited to make AES a practical reality. 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 RCR 50/2006. 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 cannot see how a very outdated resolution binds the Registrar to a patently unlawful action.

A further criticism challenges 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 and undoubtedly benefit all stakeholders. The solution provider has made huge efforts in using AES to facilitate and speed up rates clearance processes. I am informed that where local authorities have implemented electronic rates clearance technologies, the 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 helping avert what was regarded as a crisis. It should also be noted that the acceptance by registrars of rates clearance certificate printouts signed using AES, is identical in principle to the acceptance by registrars of a printout, duly certified, of a Power of Attorney signed using AES.

Finally, there is concern that this development is a step in a process to eventually take conveyancing work away from conveyancers. 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 we deserve that “entitlement” if we are the barrier to inevitable and much-needed change.

Conclusion

Change is by its nature disruptive and we are living in a time that has seen unprecedented change and disruption. Most of my professional career has been seized with the practical and legal implications of modern technologies and the disruption they cause. Thus, I 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. Yet 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 been resistant to 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?