In June 2023, a Canadian Court in South-West Terminal Ltd v Achter Land and Cattle Ltd, 2023 SKKB 116, held that the “thumbs-up” emoji carried enough weight to constitute acceptance of contractual terms, analogous to that of a “signature”, to establish a legally binding contract.
This case involved a contractual dispute between two parties namely South-West Terminal (“SWT”), a grain and crop inputs company; and Achter Land & Cattle Ltd (“ALC”), a farming corporation.
SWT sought to purchase several tonnes of flax at a price of $17 per bushel, and in March 2021, Mr Mickleborough, SWT’s Farm Marketing Representative, sent a “blast” text message to several sellers indicating this intention.
Following this text message, Mr Mickleborough spoke with Mr Achter, owner of ALC, whereby both parties verbally agreed by phone that ALC would supply 86 metric tonnes of flax to SWT at a price of $17 per bushel, in November 2021.
After the phone call, Mr Mickleborough applied his ink signature to the contract, took a photo of it on his mobile phone and texted it to Mr Archter with the text message, “please confirm flax contract”. Mr Archter responded by texting back a “thumbs-up” emoji, but ultimately did not deliver the 87 metric tonnes of flax as agreed.
The parties did not dispute the facts, but rather, “disagreed as to whether there was a formal meeting of the minds” and intention to enter into a legally binding agreement.
The primary issue that the Court was tasked with deciding was whether Mr Achter’s use of the thumbs-up emoji carried the same weight as a signature to signify acceptance of the terms of the alleged contract.
Mr Mickleborough put forward the argument that the emoji sent by Mr Achter conveyed acceptance of the terms of the agreement, however Mr Achter disagreed arguing that his use of the emoji was his way of confirming receipt of the text message. By way of affidavit, Mr Achter stated “I deny that he accepted the thumbs-up emoji as a digital signature of the incomplete contract”; and “I did not have time to review the Flax agreement and merely wanted to indicate that I did receive his text message.”
In deciding this issue, the Court needed to determine whether there had been a “formal meeting of the minds”.
At paragraph , Justice Keene considered the reasonable bystander test:
” The court is to look at “how each party’s conduct would appear to a reasonable person in the position of the other party” (Aga at para 35). The test for agreement to a contract for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract (Aga at para 36). The question is not what the parties subjectively had in mind, but rather whether their conduct was such that a reasonable person would conclude that they had intended to be bound (Aga at para 37).”
Justice Keene considered several factors including:
At paragraph , Keene J said:
“I am satisfied on the balance of probabilities that Chris okayed or approved the contract just like he had done before except this time he used a thumbs-up emoji. In my opinion, when considering all of the circumstances that meant approval of the flax contract and not simply that he had received the contract and was going to think about it. In my view a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad item – a meeting of the minds – just like they had done on numerous other occasions.”
The court satisfied that the use of the thumbs-up emoji paralleled the prior abbreviated texts that the parties had used to confirm agreement (“looks good“, “yup” and “ok“). This approach had become the established way the parties conducted their business relationship.
Justice Keene acknowledged the significance of a thumbs-up emoji as something analogous to a signature at paragraph :
“This court readily acknowledges that a thumbs-up emoji is a non-traditional means to “sign” a document but nevertheless under these circumstances this was a valid way to convey the two purposes of a “signature” – to identify the signator… and… to convey Achter’s acceptance of the flax contract.”
In support of this, Justice Keene cited the dictionary.com definition of the thumbs-up emoji: “used to express assent, approval or encouragement in digital communications, especially in western cultures”, confirming that the thumbs-up emoji is an “action in an electronic form” that can be used to allow express acceptance as contemplated under the Canadian Electronic Information and Documents Act 2000.
Justice Keene dismissed the concerns raised by the defence that accepting the thumbs up emoji as a sign of agreement would “open the flood gates” to new interpretations of other emojis, such as the ‘fist bump’ and ‘handshake’. Significantly, the Court held, “I agree this case is novel (at least in Skatchewan), but nevertheless this Court cannot (nor should it) attempt to stem the tide of technology and common usage.”
Ultimately the Court found in favour of SWT, holding that there was a valid contract between the parties and that the defendant breached by failing to deliver the flax. Keene J made a judgment against ALC for damages in the amount of $82,200.21 payable to SWT plus interest.
This is a Canadian decision meaning that it is not precedent in Australia. However, an Australian court is well within its rights to consider this judgment when dealing with matters that come before it with similar circumstances.
This judgment is a reminder that the common law of contract has and will continue to evolve to meet the everchanging realities and challenges of our day-to-day lives. As time has progressed, we have seen the courts transition from sole acceptance of the traditional “wet ink” signature, to electronic signatures. Electronic signatures are legally recognised in Australia and are provided for by the Electronic Transactions Act 1999 and the Electronic Transactions Regulations 2020. Companies are also now able to execute certain documents via electronic means under s 127 of the Corporations Act. We have also seen the rise of electronic platforms such as “DocuSign” used in commercial relationships to facilitate the efficient signing of contracts.
Furthermore, this case highlights how courts will interpret the element of “intention” when determining whether a valid contract has been formed, confirming the long-standing principle that it is to be assessed objectively from the perspective of a reasonable and objective bystander who is aware of all the relevant facts.
Overall, this is an interesting development for parties engaging in commerce via electronic means and an important reminder to all to be conscious of the fact that contracts have the potential to be agreed to by use of an emoji in today’s digital age.
The recent decision in New Aim Pty Ltd v Leung  FCAFC 67 (New Aim) has provided some useful guidance in relation to briefing experts in litigation.
On 12 July 2023, the Australian Commonwealth's Parliamentary Joint Committee on Corporations and Financial Services (Committee) released its landmark report on the state of corporate insolvency in Australia (Report). As distinct from individual or personal insolvency (i.e. bankruptcy), the Report's findings and recommendations speak to the state of Australia's corporate insolvency regime. The publication of the Report has been highly anticipated, given there have been no comprehensive reviews of Australia's corporate insolvency regime of note since the tabling of the Australian Law Reform Commission's general insolvency inquiry (also known as the Harmer Report) on 13 December 1988. The Commission asked whether the current corporate (and to some extent personal insolvency) regime is fit for purpose within modern Australia and if its frameworks are in line with international standards. In short, the Committee found that Australia's corporate insolvency system is overly complex, difficult to access, unnecessarily costly and confusing. The Report observed that few stakeholders are satisfied with the system as it stands today and that it may not have kept up to speed with modern business practices or needs. What is corporate insolvency? Insolvency law is generally understood as a regime which provides for the fair and orderly process of dealing with the financial affairs of companies when they are no longer able to pay their debts as and when they fall due. In Australia, the three most common insolvency procedures are voluntary administration, receivership and liquidation, with their basic features set out below: Voluntary Administration: aims to rescue a company that is in financial difficulty. An independent administrator is appointed (most often by the company's directors) to take full control of the company and manage its affairs until the fate of the company is decided by its creditors. This can result in liquidation (see below) or entry of a Deed of Company Arrangement (DOCA) which forms an agreement between the administrator and the company's creditors in a way that see's the business returned to its directors. Receivership: is a process that enables a secured creditor to appoint a receiver to the company. The receiver's role is to take control of the secured assets and repay the secured debt. If there are any assets or money leftover when the receivership is complete, the company is returned to its directors. Liquidation: (or winding-up) is the process by which a company is shut down. All assets of the company are sold, and the money raised is used to repay the company's debts. This process can be initiated by the company's shareholders when the lifecycle of the company has reached its end, creditors of the company, or by order of the court. To those who do not engage in the processes of corporate insolvency regularly, the system may however appear to be opaque and without clear purpose. In dealing with a company's financial affairs, there exists a tension between the insolvent debtor who owes money, and the creditors who may be owed large sums in arrears. The mechanisms of insolvency law are intended to provide an impartial and efficient process for administering those competing claims and providing relief for all involved. In addition, there is a rehabilitative aspect to insolvency law, as a number of insolvency processes, notably voluntary administration, focus on maximising the chances of a struggling company to be rehabilitated and continue in existence. It is clear that there are many "purposes" of corporate insolvency, but as noted by the Committee, a clearly stated purpose of Australia's insolvency law is substantially absent in legislation. This includes a lack of legislative 'objects clause' for insolvency in the Corporations Act 2001 (Cth), the principal legislation governing the obligations and responsibilities of companies and other business entities. At first instance, the Committee: "considers there would be value in more clearly articulating, in legislation and policy, the guiding principles and objectives of the corporate insolvency system. This will help facilitate ongoing assessment of how the system is performing and enhance transparency and understanding of it." Comprehensive and systemic review, or immediate action? The Committee says both The implementation of corporate insolvency reform since the implementation of the recommendations by the Harmer Report has been piecemeal in nature and scope, responding to discrete issues and challenges rather than having regard to the system as a whole. This has added further complexity to the systems of corporate insolvency, further obscured its purpose, and as the Committee noted – adding inconsistencies which make it all the harder and more costly to navigate. The Committee's conclusion was that, to address the shortcomings of the corporate insolvency system, there is need for an independent and comprehensive review that addresses the system as a whole. The key matters to be addressed include: re-examining the principles, purposes, and objectives of the insolvency system (recommendation 2); the interaction between the personal and corporate insolvency systems (recommendation 3); the need for improved insolvency data (recommendation 5); the current system of insolvency pathways, and reforms to specific pathways (recommendations 6, 7 and 9); the requirements for the registration of small business restructuring practitioners (recommendation 11); remuneration of insolvency practitioners (recommendation 13); the independence requirements for insolvency practitioners (recommendation 14); issues associated with of ‘untrustworthy pre-insolvency advisors’ (recommendation 15); options for funding the administrations of assetless companies, including reforms to the Assetless Administration Fund and the creation of a public liquidator for corporate insolvency (recommendation 18); statutory reporting obligations that apply to insolvency practitioners (recommendation 19); the operation of the insolvent trading regime and its impact on the broader corporate insolvency framework (recommendation 20); overall economic and social benefits and costs of ATO relief to potentially insolvent companies in hard economic times, in the context of the impacts on the purposes of the insolvency system (recommendation 21); the relative priority of employees, liquidators and secured creditors (recommendation 23); franchising insolvency issues (recommendation 25); and unfair preferences and voidable transactions (recommendation 27). What about the "low hanging fruit"? The Committee acknowledged that comprehensive review may take some time to be incorporated (e.g. the Harmer Report recommended the creation of the voluntary administration regime which was legislated five (5) years later), but nonetheless identified several key steps which could be taken by ASIC and/or the Federal Government in the near term, including: the collection of high quality, granular data by ASIC (recommendation 4); ASIC collecting and analysing data from an appropriately sized sample of voluntary and compulsory deregistrations, to provide greater visibility of the solvency status of deregistered companies (recommendation 10); implementing the recommendations of the Safe Harbour Review (recommendation 7); reforms to simplify the small business restructuring pathway and the simplified liquidation pathway (recommendation 8); reforms to the experience eligibility requirements for registered liquidators, to address the inequity of the requirements and the gender imbalance in the population of registered liquidators (recommendation 12); prompt action to improve the regulation and active enforcement of pre-insolvency advisors (recommendation 15) consideration of changes to the Assetless Administration Fund to ensure that it is achieving its intended policy objectives (recommendation 16); assessing potential benefits of a Public Interest Administration Fund (recommendation 17); consideration of amendments to the thresholds for reporting requirements for insolvency practitioners, and ASIC’s responses to them (recommendation 19); the ATO to consult, act on and public model creditor guidelines, consistent with its model creditor obligations (recommendation 22); reforms to improve the framework designed to ensure access to the Fair Entitlements Guarantee, both to prevent misuse, and to ensure capture of all individuals with valid entitlements (recommendation 24); the government responding to the Whittaker Review of the Personal Properties Securities Act 2009 (recommendation 26); and improving the insolvency process for trusts (recommendation 28). Next steps Only time will tell which of the recommendations of the Committee will be taken on board and what legislative changes will come as a result. As the Report has identified, there are a number of key deficiencies within the Australian corporate insolvency landscape and a comprehensive overhaul of the system is required. The Commission rightly calls for a holistic "root and branch" review that looks not only to the current legislative complexity, but also the economic realities that Australian businesses find themselves in. McCabes' Litigation and Dispute Resolution team has extensive experience in advising large to small companies as well as directors, liquidators, creditors and other stakeholders of companies in an insolvency context. If any of the matters raised in this article are applicable to you, please get in touch.