28/02/2018

In a legal context we are often required to assume multiple responsibilities or assume multiple roles. For example the same person can be the shareholder of a company, a director or that company and even an employee of the company as well.

A recent case has highlighted the need to be very aware of your different legal roles and ensure you don’t get them mixed when signing documents.

In the context of signing a deed, the recent NSW case of Reliance Financial Services Pty Ltd v Pineiro touches on the issue. The court considered the issue of a director of a lender company who assumed two responsibilities; (1) signing the Deed of Loan on behalf of the company, and then (2) also witnessing the borrower’s signature on the deed.  
 
For a deed to be validly executed in NSW, individuals’ signatures should be witnessed by an independent person who is not a ‘party to the deed’ . The concern was whether or not the director was a ‘party to the deed’ as he signed the deed on behalf of the company. It was argued by the borrower that the Deed was not executed in compliance with this requirement.

 The Court held that the deed was validly executed. The judge confirmed that the director and his company are different legal entities and the director was not a party to the deed as he executed the deed as an agent on behalf of the company.

His witnessing of the borrower’s signature was done in his personal capacity. The conclusion from the above reasoning was that although the director had an ‘indirect interest’ in the deed, he was not ‘a party to the deed’.

Despite the judgment above, one should avoid wearing too many hats when signing a Deed. The judgment was in a specific context and may not always be applicable to your circumstances.

If you are a party to the deed don’t witness anyone else’s signature.

If you have signed as a director of a company which is a party to the deed, again, for the sake of prudence, don’t witness anyone else’s signature.

For further information, please contact Townsends Business & Corporate Lawyers on (02) 8296 6222.