31/10/2018

In the wake of this year's much publicised Cambridge Analytica data breach, and with the rise of digital assets such as cryptocurrency, and other jurisdictions such as Canada enacting legislative changes to address access to digital assets, it is not surprising that the NSW Law Reform Commission has released earlier this year its consultation paper on the current laws affecting access to digital assets in NSW upon death or incapacity.

It’s difficult to define what precisely is a ‘digital asset’ but it includes a multitude of different types of data that exists in a digital format and of course the rights that might accompany that data, including the right to control that data.  Note that this does not include rights that are simply accessed via electronic means; so for example a bank account is not a digital asset even though you might operate the account electronically.

The NSW Law Reform Commission is the first Australian jurisdiction to examine the issue of how to deal with digital assets. In doing so, it focused on the following:

•    the current laws affecting access to digital assets in NSW;
•    the practices being used to overcome the legal impediments to access; and
•    the recent innovative changes to the law in other jurisdictions to allow access to digital assets.

The NSW Law Reform Commission recognised that the need to address this issue is largely due to the fact that there is currently no NSW law that clearly addresses what is to happen to a person’s digital assets when they die or become incapacitated. Addressing this issue is important so that personal representatives such as executors, administrators, attorneys and trustees can effectively deal with a person’s financial or personal affairs.

In its investigation the NSW Law Reform Commission looked at the following current laws:
•    Succession Act 2006 NSW) (“Succession Act”) which deals with the type of property a person at the time of death is able to bequeath in a will;
•    Probate and Administration Act 1898 (NSW) which deals with the administration of a deceased person’s assets and entitles the legal personal representative to administer the deceased person’s estate;
•    Powers of Attorney Act 2003 (NSW) which deals with assisted decision-making laws; and
•    Guardianship Act 1987 (NSW) which permits the appointment of attorneys and financial managers to manage a person’s property and financial affairs once a person becomes incapacitated.

Having examined the above current laws, the NSW Law Reform Commission noted that laws such as the Succession Act did not clearly define whether digital assets would fall within the definition of “property” that could be bequeathed in a will. It also recognised that while there may be laws which entitle a legal personal representative to administer a deceased person’s estate terms in a service agreement may nonetheless prohibit this.

The NSW Law Reform Commission has suggested that possible law reform approaches might include, amending the definition of “property” in the Succession Act to clarify what type of digital assets a person should be able to bequeath or give access to in a will, specifying in legislation what succession laws should apply when there is a concession to NSW, enacting NSW provisions that allow a legal personal representative to access the digital assets of a deceased person to administer their estate properly such as including the right to access depending on the person’s explicit wishes and intentions, enacting provisions that allow attorneys and financial managers to access the digital assets of a person to manager their estate by ensuring that instruments or laws that would otherwise restrict access do not apply such as service agreements, criminal and privacy laws.

The consultation paper also examines recent proposed model legislation of the US, Canada, European Union and Council of Europe that facilitates a fiduciary’s access to digital assets while upholding the privacy of users and the interests of service providers.

In relation to the developments of legislative frameworks that have been enacted in other jurisdictions, the NSW Law Reform Commission is examining whether the definition of digital assets should include illustrative examples and exclusions, that a legal framework should provide categories of the types of fiduciaries that are able to have access to digital assets, but include the executor or next of kin of smaller estates into this category, and that a person’s most recent instruction concerning the right to access a digital asset takes priority.

Overall, the NSW Law Reform Commission recognises that there are substantial grounds for legislative reform to govern when third parties can access a person’s digital assets upon death or incapacity.

While we still have a long way to go in terms of enacting a legislative framework that clearly deals with what would happen to a person’s digital assets the fact that the NSW Law Reform Commission has come out with its consultation paper and is to provide its final submission soon will hopefully pave the way for other States and Territories to submit similar consultations to address this important issue.

For further information, please contact Townsends Business & Corporate Lawyers on (02) 8296 6222 or email info@townsendslaw.com.au to see how we can assist