[co-author: Tayler Meagher - Articling Student]
It is an understatement to say that COVID-19 has interrupted business operations across all sectors. With many Albertans quarantining or self-isolating, work and social gatherings have increasingly moved online. The virtual realm also applies to commercial transactions with electronic signings and closings becoming an important tool, as the public health emergency has prevented in-person meetings. In the coming months, businesses will likely require borrowed funds to navigate through the global crisis, and they will almost certainly look for innovative methods to do this in the "new normal". Businesses can continue their commercial transactions virtually, including in the context of lending institutions funding loans during these uncertain times, though with some additional complexity.
Commissioning Corporate and Court Documents Virtually
After declaring a public health emergency in Alberta last month, the Government of Alberta began implementing measures to reduce the spread of COVID-19. On April 2, 2020, it issued a Ministerial Order temporarily allowing for various court and corporate documents to be executed electronically via videoconference in order to maintain social distancing recommendations. Accordingly, solicitors can now commission several documents under the Land Titles Act and the Personal Property Security Forms Regulations via electronic means. The process outlined in the Order is similar to the process outlined in the March 25, 2020, Court of Queen's Bench of Alberta – Notice to the Profession and Public relating to remote commissioning of affidavits.
When commissioning an affidavit taken by video conference, both the commissioner and the deponent must have a full copy of the affidavit and all exhibits in front of them. The document must contain a section stating that it was commissioned electronically and both commissioner and deponent adhered to the steps detailed in the Order. Once both parties have selected a secure virtual platform, they can initiate the process, ensuring that it is completed in one session. Immediately after signing and commissioning the affidavit, the deponent must send an electronic version of the document to the commissioner and then courier the original signed copy to the commissioner. The commissioner then reviews the version sent to them by the deponent to verify it is identical to the version reviewed by the commissioner during the video session. The commissioner then completes the affidavit only upon being satisfied that the two copies are identical. For court documents, the Queen's Bench Notice then requires both copies of the affidavit to be attached to a certificate signed by the commissioner confirming the process was necessary because it was impossible or unsafe for medical reasons for the deponent and commissioner to be physically present together.
Obviously, the process outlined above is more complex and time consuming than it would otherwise be in a non-pandemic environment, but the Government of Alberta and the Alberta Court of Queen's Bench have recognized that the normal process of commissioning affidavits may not be practical (and is actually riskier to public health) given the current state of affairs.
Physical Signings for Guarantees
The Order does not apply to guarantees and lenders often require original copies of these documents. This will make complex lending transactions more difficult to complete. COVID-19 may preclude a signatory's ability to obtain original documents where they are quarantining or self-isolating.
Regarding personal guarantees, Alberta's Guarantees Acknowledgement Act requires a lawyer to execute the guarantee and sign a Guarantor's Acknowledgement Certificate. The Guarantees Acknowledgement Act, which predates the era of electronic documents, does not contemplate electronic signings. As of the date of publishing, May 5, 2020, the Government of Alberta has not amended the Act to reflect changes for electronic authorization, as it has done with Land Titles and other corporate and court documents. We understand that some financial institutions have temporarily suspended the requirements under the Act to allow delivery of personal guarantees via courier or electronic means. The guarantor and solicitor can then video conference to effect the witnessing of the certificate. It is important to note, however, that the certificate should not claim that the guarantor and solicitor met in person when they, in fact, did not.
The electronic and remote completion of a guarantee is not without risk, as the enforceability of a guarantee in Alberta requires compliance with the Guarantees Acknowledgement Act. At this point it is not clear how a court will interpret the question of whether the Guarantees Acknowledgement Act has been complied with when execution happens remotely. In the extraordinary circumstances we are currently in, the hope is that the courts will take a pragmatic approach.
Thus, until such time as the Government of Alberta addresses the issue of executing personal guarantees remotely, the safest legal course is for a face-to-face completion of the requirements of the Guarantees Acknowledgement Act while ensuring that public health protocols are followed, such as maintaining social distancing by keeping at least six feet apart and using separate writing instruments and other supplies.
If the decision is made to proceed remotely using video conference technology, the certificate required under the Guarantees Acknowledgement Act should be modified only so much as required so as to comply with the Order by using the process listed above. For added protection, guarantors and their advisors should commit to signing proper documentation that complies with the provisions of the Guarantees Acknowledgement Act once the public health emergency is over.
This issue will also affect client identification and verification rules for lawyers, which typically requires the signatory be physically present with the lawyer. Although the Government of Alberta has modified these rules to permit face-to-face verification via video conference, the parties should take additional precautions to protect against fraud. For example, in the context of real estate transactions, certain title insurance policies will cover events of allegations of fraud where client identification and verification, execution of documents, or commissioning of oaths have been conducted electronically.
Potential Delays with Registries
The closure of non-essential businesses has caused delays to courts and various land titles and personal property registries across Canada. Lenders and borrowers should ensure all court proceedings and registration matters are completed as soon as practically possible to avoid missing any deadlines. Notably, title insurance providers may provide gap coverage for COVID-19-related delays; individuals should discuss these policies with their advisers to avoid funding delays.
