Execution of documents: UK banks focus on Treating Customers Fairly

3rd December 2019

Executing documents in today’s fast-paced, technology-driven world

In today’s mortgage market, consumers are increasingly used to conducting their social and financial lives at the click of a button. Despite conveyancers, consumers and lenders all moving towards increased digitisation, the live issue of the validity of signatures on conveyancing and court documents is one that spans both electronic and traditional execution methods.

The Law Commission has recently considered legal and practical issues associated with the execution of documents, particularly electronically, and whether current law is fit for purpose and for modern commercial practice.  The Commission’s conclusions were published in a report on 4 September 2019 [1].

At the same time, financial services firms throughout the UK will be aware that a campaign group, ‘Bank Signature Forgery Campaign’ (BSFC), has alleged that signatures have been forged, by a number of firms and/or their legal representatives, on court and other legal documents that have been used to repossess properties and to recover debts.

What are the allegations?

BSFC’s founder has claimed in the press and on social media that he has gathered evidence of several different signatures being recorded against the name of a person within a law firm which acts for financial services firms [2] responsible for signing legal documents.  He has claimed to have identified 20 different people within a number of firms all of whom appear to have different signatures used against their name.  The suggestion is that, as a systemic practice, employees within firms have forged signatures to facilitate or speed up the legal process – for example where the case-handler or other designated signatory might be off sick, on leave or otherwise unavailable.

Several firms have so far publicly denied any involvement in systemic signature forgery and have reiterated their commitment to treating customers fairly.

With the allegations having been put to the Serious Fraud Office, the Financial Conduct Authority and the National Crime Agency; and with the Treasury Select Committee, the All-Party Parliamentary Group on Fair Business Banking, and the Police and Crime Commissioner for Thames Valley all pressing for an investigation (albeit no investigation has yet been confirmed), it is important that firms – and, crucially, their customers – correctly understand the legal issues.

Policy, practice and protection of professional reputation

The law is a profession in which it is essential that the public can place its trust.  It is critically important that any allegations levied against it are addressed publicly.

In today’s consumer-focused and heavily regulated environment, financial services colleagues and their legal representatives involved in the recovery of payments and/or possession from customers, are professional people required to adhere to high standards of conduct. In carrying out their job roles they will be concerned to preserve their professional and commercial reputation.  Both at an industry level and internally within firms, comprehensive policies, procedures and staff training should be in place to ensure that individual employees and/or legal practitioners know exactly the legalities and formalities associated with executing court papers and other legal documents.   It also bears noting than an individual colleague would have nothing to gain from departing from their firm’s execution policy; and in fact could face significant personal and professional sanctions for doing so.

The preparation and signing of documents in these circumstances is also, in the vast majority of cases, a matter of standard process and procedure – with the content of documents simply being taken from account information already on-boarded within the lender’s systems, and with law firm or lender colleagues then executing documents in accordance with specified policies and practices.

In addition, of course, in the interests of practicality and efficiency for clients and customers, it is standard, industry-wide approved practice that execution policies allow for more than just one specified signatory.

From a practical and professional perspective, therefore, it is highly unlikely that the systemic forging of signatures is occurring or accepted within the UK’s financial services industry.  It is certainly not something which the author has ever encountered during many years’ practice in Banking Litigation.

Nevertheless, the BSFC allegations are creating noise with consumers via social media, with many borrowers believing that if there are potential differences or discrepancies with signatures on their mortgage or court documents, then they can get out of making mortgage or loan repayments, justify missed payments and/or unravel court judgments that have been made against them.  So what actually is the legal position?

What is the legal position?

Signature valid in any event

It is interesting to note, when asking that question, that in its recent report the Law Commission reviewed the law in relation to the execution of documents generally, and explained that all of the following forms of ‘signature’ have (amongst others) been found by the courts to be legally valid: signing with an “X”; signing with initials only; signing with a mark (even where the party executing the mark can write); a name typed at the bottom of an email; the header of a SWIFT message; and so on.

In concluding that electronic signatures are capable in law of being used to validly execute documents (including deeds), the Law Commission placed emphasis on the fact that what matters is that the person signing the document intends to authenticate the document and that any formalities relating to execution of that document are satisfied [3].

It is, of course, also possible for parties to a legal document to delegate responsibility for execution – again, so long as any necessary formalities are satisfied.  That delegation is commonly seen in a wide variety of scenarios – for example, directors, managers etc. executing documents on behalf of companies; law firm employees executing documents in the name of the firm to bind the partnership as a whole; agents executing contract documents to bind their principals; etc.

It is arguable, therefore, that it is not the mark which is ultimately made on a document which matters from a legal perspective – but whether the person (be it an individual or a lender/company) on whose behalf the mark is made (and will be legally bound by it) intends to authenticate that document and all it stands for.

Applying that logic to a practical example, it is arguable that it would be legally valid for, say, a junior case-handler within a bank or a law firm acting for a bank to sign certain possession/debt claim documents in their supervisor’s name on the basis that: (a) the case-handler’s signing of the supervisor’s name is tantamount or equivalent to an electronic representation of the supervisor’s name or other recognised legally valid mark; and (b) that the supervisor and the bank intended for that signature to authenticate those documents and for those documents to bind the supervisor/the bank.

Signature invalid

If, however, a document was found not to have been validly signed, in most cases that would effectively render the document unsigned altogether.  In practice, the court usually remedies such a defect by ordering the party in question to sign validly (and costs penalties may follow – the lender may have to pay the costs to put the issue right), or to adduce evidence in some other way (a new witness statement; oral evidence; an alternative witness).  In our practical example, should a court make such an order, the bank or law firm would presumably have no difficulty in then procuring the supervisor’s valid signature or producing fresh, procedurally-compliant evidence.

Alternatively, it could be argued that, where signatures had been forged, judgments have been obtained by fraud and should therefore be set aside on the basis that ‘fraud unravels all’ [4].  Under English law, there is no defined cause of action of civil or commercial ‘fraud’. Instead, the term is used to cover a range of legal options, including deceit or fraudulent misrepresentation; claims arising out of conspiracy, bribery, forgery, breach of fiduciary duty and breach of trust; and inducing breach of contract, many of which often form elements of lender litigation.  In our practical example, whether or not the bank was guilty of fraud would be determined by the court assessing whether there had been any deliberate action on behalf of the bank which involved dishonest conduct.

Such a finding would perhaps be unlikely in the consumer-focused, highly-regulated, professional environment mentioned above.  However if a court were to find that a case-handler signing in the name of a supervisor did amount to dishonest conduct, and that any judgment following on from that was therefore obtained by fraud – what then?

In fact, it is quite possible that a court would not decide that any such fraud must unravel possession/debt judgments made in favour of banks in any event, because to do so could fly in the face of both the principle of res judicata (that is, the rule against re-litigation which emphasises the importance of finality in litigation) and the practical convention that the courts should avoid ‘opening the floodgates’ to any flow of claims where that would be contrary to public policy and to the efficiency and efficacy of the court process [5].  Certainly if significant numbers of cases were brought, this could bring chaos to an already overburdened court system.

In addition, of course, in the vast majority of cases the fact would remain that borrowers had had the benefit of funds advanced to them and had failed to repay.  In such cases it is more than likely that the law of equity (fundamental fairness) would ultimately provide a remedy for the banks, and would prevent borrowers from becoming unjustly enriched.

Responding to allegations

As noted above, several firms have so far publicly denied any involvement in systemic signature forgery.  At an individual level, financial services colleagues and their legal representatives involved in the recovery of payments and/or possession from customers, are professional people subject and adhering to high standards of regulation and reputation.

There is therefore a genuine risk that the BSFC’s allegations – just like any other type of ‘get out of your mortgage free’-type claims which are fuelled by social media forums but which are inevitably legally flawed – are misconceived.  The real danger is that belief and reliance upon misleading and incorrect assertions could actually prove harmful to borrowers.  In particular, there is a risk that borrowers misled into withholding mortgage/loan payments could be exposed to mounting debt and potentially even to losing their homes, adding to the problems of those already in financial difficulties.

In the interests of treating customers fairly, firms facing any signature forgery allegations should advise borrowers to take their own specialist legal advice, and to discontinue any misconceived legal proceedings, at the earliest possible time. It is, of course, in the borrowers’ interest to keep any associated costs to an absolute minimum, not least because legal costs can, in the usual course, be added to the mortgage account in accordance with the mortgage terms, and they may therefore exacerbate any existing borrower-affordability issues.

In relation to the issues of increasing digitisation, e-conveyancing and the electronic execution of signatures more generally, it is clear that these are ‘ones to watch’.  Indications from the Law Commission are that we may soon have some clarified and codified legislation and good practice guidance which, together, will confirm speedy and safe options for parties wishing to execute legal documents.  Walker Morris will continue to monitor and report on key developments.

If you are or act for a financial services firm and would like any further information or advice on any of the issues discussed in this article, please do not hesitate to contact any member of Walker Morris’ Banking Litigation team.

[1] Please see our Walker Morris briefing for further information on the Law Commission’s report.
[2] Not Walker Morris – another, unspecified law firm
[3] Such formalities may be required by legislation, or may be laid down in a contract or other legal instrument under which a document is to be executed. Examples of formalities that might be required include that the signature be witnessed; or that the signature be in a specified form (such as being handwritten).
[4] Takhar v Gracefield Developments Lts & Ors [2019] UKSC and see our briefing for further information and advice.
[5] These arguments have found favour with the courts recently in the context of other wrongful possession claims – see Walker Morris’ recent briefing for further detail.