Gordon Ramsay has recently found himself in the centre of a new kind of kitchen nightmare as a personal guarantor to a 25 year lease of the York & Albany, a loss making restaurant and hotel in central London. He claimed that the lease was signed using a signature writing machine by his father-in-law allegedly without Ramsay's knowledge.
In 2008 Northam Worldwide Ltd (Northam) granted a 25 year lease of the York & Albany in Regents Park to Gordon Ramsay Holdings International Limited (GRHIL). The lease was guaranteed by both Gordon Ramsay Holdings Limited (GRHL) and Ramsay himself.
Initially celebrity chef Angela Hartnett was appointed Head Chef, but the restaurant did not achieve the profitability expected and she left in late 2011. In September 2011 after the restaurant had made heavy losses which Ramsay personally had to fund, Ramsay put it to Love, the then freeholder, that he was not bound by the guarantee. It was accepted that both GRHIL and GRHL were bound by the lease as lessee and guarantor respectively.
Ramsay brought a claim against Love to set aside the guarantee. He submitted that the personal guarantee given by him on the £620,000 per annum lease was provided by his estranged father-in-law Christopher Hutcheson through the use of a signature writing machine without his knowledge or authority.
Ramsay's claim failed. There were in fact 2 signature writing machines in use at GRH in the basement and fifth floor which were used extensively; 42 separate documents were signed using the machine. Mr J Morgan held 'the extensive use which was made of the machine to place Mr Ramsay's signature on the legal documents makes it inherently likely that Mr Ramsay knew of its use.'
Additionally Mr J Morgan held Hutcheson did have the authority to bind Ramsay in his personal capacity:
"Mr Hutcheson was acting within the wide general authority conferred on him by Mr Ramsay at all times until Mr Hutcheson's dismissal in 2010. Mr Ramsay may now regret the transaction in relation to the premises. He may particularly regret his involvement as a guarantor. He may consider Mr Hutcheson did a bad deal. However on any finding, he is not able to say that Mr Hutcheson exceeded his authority in any respect. I hold that Mr Ramsay, acting through his agent Mr Hutcheson is bound by the guarantee in the lease of the premises."
What is a signature?
A guarantee under a lease is frequently required by commercial landlords to ensure tenant obligations are met, if not by the tenant, then by the guarantor. This commonly includes obligations extending beyond the payment of rent.
A guarantee is not a contract for land under the Law of Property (Miscellaneous Provisions) Act 1989 (the LPA) but remains subject to section 4 of the Statute of Frauds 1677. As such, no claim may be brought under a guarantee unless the guarantee is in writing with the signature of the guarantor or someone duly authorised by the guarantor.
It was accepted by Mr J Morgan that a 'wet-ink' signature, that being one signed physically by the guarantor, was not necessary. This follows the principle found in Mehta v J. Pereira Fernandes SA  2 All ER 891: a signature for the purposes of a guarantee can be provided in number of ways, what is important is giving, and having the intention to give, authenticity to it. This can include signatures provided physically or electronically, writing the full name, initials, pseudonym or combinations of letters and numbers. The Electronic Communications Act 2000 and the Electronic Signature Regulations 2002 also govern what constitutes an electronic signature.
This should be distinguished from an indemnity (which is regularly contained within the guarantee provisions of a lease) as this has no specific formal requirements; it need not be in writing or signed by the indemnifier to be effective. This was where Ramsay's submission fell down. The guarantee was in fact an indemnity, and so the use of a signature writing machine was irrelevant.
Had it been material, the dictum of Mr J Morgan suggests that a signature for a guarantee using a machine such as this may have been held to be valid applying the ratio of Mehta, but frustratingly this was not concluded. The use of the machine is a strange hybrid when applying Mehta, as the product is neither a wet-ink signature nor an electronic one. This point remains to be tested, as this case instead turned on whether Hutcheson had the authority to bind Ramsay.
Would this approach apply to other documents and specifically to contracts for land?
Notably, this modernist approach to what is considered a valid signature has not been transferred to the interpretation of what constitutes a signature for the purposes of section 2 LPA. The formalities for a contract for land require the instrument to be in writing and validly executed as a deed by the person making it or by one or more of the parties to it. The most recent high level analysis of this can be found in Firstpost Homes Ltd v Johnson  4 All ER 355 where it was held that the word signed should have a "meaning which the ordinary man would understand it to have". This begs the question: how long will it be until the ordinary man understands electronic and other hybrid signatures to mean a document is signed?
What are the formalities for giving a third party authority to sign?
Authorisations to sign on behalf of a guarantor or indemnifier are often formalised through the grant of a power of attorney or through a board resolution. This provides certainty to the scope of the authority granted. However, actual authority is not the only way for a person to be granted authority to sign on behalf of a guarantor. Here, Ramsay had provided implied authority to his father-in-law through customarily leaving business and legal decisions to Hutcheson. The extent of this authority was never formalised:
"Mr Ramsay's own evidence establishes the very extensive, if not total, trust which Mr Ramsay placed in Mr Hutcheson to deal with business affairs on behalf of both the companies and Mr Ramsay himself. It is not said that there was any express or specific limitation as to the business or contractual matters…"
Subsequently, Mr J Morgan found in favour of the respondent due to the wide authority granted to Hutcheson to bind Ramsay.
What wider impact does this case have?
- What is considered a signature for a guarantor has a wide ambit and the use of a signature writing machine is acceptable to the Courts. Therefore, it is important to be completely clear on what is agreed and by whom on behalf of the guarantor and/or indemnifier.
- Landlords can take some comfort from Mr J Morgan's approach. His judgment of the contractual formalities provides certainty to landlords that the signature of a guarantor can be relied upon by a landlord in good faith.
- For leases, transfers of land and contracts for sale and purchase of land a 'wet ink' signature is still required. This is a significant barrier to electronic conveyancing, although it would be important if this is to develop in the future that effective controls for execution are in place.
- Organisations should have a clear and unambiguous process for signing documents and delegating authority. This is preferably to be held within a power of attorney or through a board resolution.
The case was heard at the High Court at the end of November 2014 with no shortage of media coverage. Indeed the background facts make for an eye catching headline. However, the judgment has importantly contextualised the formalities of providing a guarantee within the lawfulness of employing a signature writing machine to sign them. Technology continues to develop at an exponential rate, and the Courts face ever more difficult questions over fundamental principles