You might have seen some of the recent media coverage of Gordon Ramsay’s court case relating to a personal guarantee given to his landlord that was signed using an “automated pen” operated by his estranged business partner and father in law. A significant sum was at stake given the personal guarantee guaranteed the tenant’s obligations to the tune of £640,000 per year for 25 years and some issues arose that will matter outside the celebrity world.
Gordon Ramsay was seeking a declaration from the Court that the automated signature was added to the document without his consent or authority and was therefore invalid. As property lawyers we are surprised that a machine signature not operated by the individual was sufficient to bind that individual to a deed but, on the facts, it was!
After a lengthy 8 day court hearing and a substantial judgment the Court decided with reference to historic evidence and previous use of the automated pen that in this particular instance Mr Ramsay’s business colleague did have the authority to bind Mr Ramsay to the guarantee and the guarantee was valid.
The practical questions come from the issue of implied and actual authority to sign documents. All organisations should have a clear process for signing documents.-
- Best practice is to give actual authority granted by formal powers of attorney, board resolutions, or letters setting out the scope of that person’s authority. This is the best way for authority to be shown and recorded.
- Do not rely on implied actual authority which is where the signatory does what is necessarily or normally incidental to that which he is expressly authorised to do, does what is usual or customary for him/her to do in materially similar circumstances or does what has been done in a previous course of dealing. This was the consent that the Court held Mr Ramsay had provided.
- Worse still do not permit signatures via ostensible or apparent authority to bind the company to documents (the signatory “always signs the documents” or holds himself out as holding an office or position). This is clearly not a good way for a company to operate.
We are sure Gordon Ramsay will have been disappointed at the outcome. Not many businesses will be operated on such an informal basis as Mr Ramsay’s and providing clear written authorities to signatories where they sign company documents and having clear internal processes is only sensible.