Electronic signatures as legal documents: Can a trust of land be created by e-mail signature?
When is an electronic signature for legal documents valid? In this blog we examine the judgment in Hudson v Hathaway (2022) – a case of an estranged, unmarried couple who went to court over ownership of the family home years after separating. Crucially, this case examined whether:
1. An email enough to transfer a person’s interest in property/land; and
2. Ms Hathaway, who claimed 100% ownership of the house, needed to show ‘detrimental reliance’ for her claim to succeed.
We discuss both points below, as well as what ‘detrimental reliance’ is, and the legal formalities required to create trusts of land.
Background
Ms Hathaway and Mr Hudson owned their family home – Picnic House – jointly and with a mortgage. There was no trust document which stated their respective shares in the house, therefore the law presumes ownership was 50-50. They had two children and Ms Hathaway left her job in finance for lower-paying employment, with Mr Hudson’s earnings overtaking hers.
They ended their relationship of nearly 20 years in 2009, having never married. Ms Hathaway remained living at Picnic House with their children and Mr Hudson moved out. For the next few years Mr Hudson paid the majority of the mortgage, and the estranged pair discussed, by email, financial arrangements (including their cash savings accrued together, pensions, his company shares, and importantly Picnic House).
In 2013, Mr Hudson sent Ms Hathaway a particularly important email (following a 2011 oil spill at the property and a long, frustrating insurance claim). He said he wanted “none of the proceeds from the house” and told Ms Hathaway to “have everything available to have now and when the house is sold“. He signed off as “Lee” (his first name).
Various emails were then exchanged over the following years, in which Mr Hudson further indicated that he considered he had no further interest in the house. “Remember,” he wrote in 2014, “the house is of no value to me: the deal […] gave you all liquid assets, including the proceeds of the house sale. I don’t care what it sells for.” Ms Hathaway took over the mortgage solely in 2015.
Fast-forward to 2019: the oil spill fallout and insurance claim had dragged on, with the house still yet to be sold. Mr Hudson went to court to order that the house (in which Ms Hathaway and her now-adult children still lived) be sold, and that 50% of its sale proceeds be paid to him. There had not, he claimed, been any transfer of his share of the house, and so (he argued) he was still legally entitled to his half. Ms Hathaway agreed the house should be sold – but argued she was entitled to all of it, not just her 50%.
The court proceedings
‘Detrimental reliance’ formed the basis of Ms Hathaway’s defence that that house was now hers entirely.
Detrimental reliance is, at a basic level, where someone relies on a promise, to their detriment. Say person A buys a farm in their own name, and assures B the intention is they both as good as own it. In reliance on that, B treats it as theirs and works for free on said farm for the rest of their life. A dies with the farm in their sole name, and B gets nothing. B argues they changed their position for the worse, in reliance on an unfulfilled promise. Even though B in this scenario might have no automatic legal right to the farm, a successful plea of detrimental reliance may see a court granting them the share they had expected.
Ms Hathaway argued she was entitled to all of the house – not just her 50% – because she had relied on Mr Hudson’s email in 2013 stating the house was hers entirely, to her detriment, in the following ways: (i) paying all interest on their joint mortgage for a number of years (ii) not claiming a share of any other of Mr Hudson’s assets, and (iii) dealing solely with the oil spill insurance claim.
The case reached the Court of Appeal, which first looked at whether the email chain itself had acted as a legal document transferring Mr Hudson’s share of the house to Ms Hathaway. If it had, the case could be decided on that alone and without the need to consider detrimental reliance.
To transfer land, there are legal formalities that must be complied with – it is not as simple as handing it over with a handshake, as we all know.
Section 53(1)(c) Law of Property Act 1925 says that to transfer an interest in land (a ‘disposition of land’), it must:
- be in writing; and
- signed by the person disposing of (transferring) their share, or signed by their authorised agent
Did Mr Hudson’s emails meet those criteria?
The Court determined that it was established case law that deliberately “subscribing” a name by e-mail sign-off can act as a legal signature which satisfies the statutory formalities for transferring land. Mr Hudson had, on that basis, released his share of Picnic House to Ms Hathaway in 2013 via the email which he signed off as “Lee”. Ms Hathaway was successful in arguing she was entitled to all of Picnic House.
The Court at First Instance and on First Appeal had found that there would have been detrimental reliance on the part of Ms Hathaway, which would also have resulted in her being awarded 100% of Picnic House. However, this argument was no longer required once the Court of Appeal concluded the email was sufficient to have transferred Mr Hudson’s share to Ms Hathaway.
Commentary
Hudson is a very important case regarding both electronic signatures for legal documents and reliance. We live in an age where emails are a primary form of communication in all matters informal and formal. It is therefore important to remember that we can commit ourselves to something email, without the need for a signed/written document.
One of the earlier cases the Court considered was J Pereira Fernandes SA v Mehta [2006] – in which the judge concluded an auto-inserted signature (which is applied to all emails once sent out) could not be construed as a signature intended to give legal effect to the contents of that email. However, manually typing your full name, or even initials, to author the email you have written can be enough.
Conversely a later case, Neocleous v Rees [2019] went further in concluding that an auto-generated signature at the foot of a message can count as ‘signing’ for the purpose of complying with statutory provisions. The sender in that case, the judge said, “knew his name would be added” and by stopping at “many thanks” he was relying on the email software adding his name.
However, it is always best to rely on formal contractual documents (rather than email) when disposing of land and property. Our Contentious Trusts and Estates team can assist with a wide variety of matters such as this. Please contact one of our experts if you need our help.
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