LEGAL DOCUMENTS CAN BE BINDING IF SIGNED BY GHOSTWRITING MACHINE
In the recent case of Ramsay v Love  EWHC 65 (Ch), the celebrity chef Gordon Ramsay (R) was found to be bound by a personal guarantee given to a landlord, even though he had not personally signed the guarantee document.
In broad terms, the lesson to take away is to be aware of what you are putting your name to. More specifically, the judgment confirmed that:
- Certain legal documents can be binding on someone where their signature is written by a signature machine
- The signature can be validly produced even where the machine is not operated by the signatory but by an agent on their behalf
- In such circumstances, for the signature to be binding, the agent needs to have sufficient authority from the signatory to create the signature.
Where an agent is employed to act for a principal they can be given a wide range of authority. This can include binding their principal in contracts with third parties where such authority is given.
The provisions of the Law of Property (Miscellaneous Provisions) Act 1989 (LPA 1989) provide that a deed is only validly executed by an individual if:
- it is signed by him in the presence of a witness who attests the signature or
- signed at his direction and in his presence and the presence of two witnesses who each attest the signature.
A guarantee can be entered into other than by deed if it is in the form of a contract of indemnity.
A lease over 127-129 Parkway, London was granted to Gordon Ramsay Holdings International Ltd in February 2007. The lease was guaranteed by Gordon Ramsay Holdings Ltd and R personally. R’s signature, where required, was written on the counterpart lease by a “Ghostwriter Manual Feed Signature Machine.”
The machine was at the company offices and the company was run by H, the Chief Executive Officer of Gordon Ramsay Holdings and R’s father-in-law. R subsequently fell out with H and their dispute boiled over into litigation which was well publicised at the time.
R challenged the guarantee on the basis that his signature had been affixed by the machine and that the machine had been operated by H without his authority. It was accepted by both the landlord and R that the lease itself was valid. It was also accepted that the guarantee was valid if it was found that R had expressly authorised H to operate the machine.
On this second point, the judge specified that the guarantee in question was a contract of indemnity and not a deed so the execution provisions of the LPA 1989 did not apply.
The principal question for the court to decide, therefore, was whether H had sufficient authority to use the machine to sign the guarantee for R. On this point, the judge made the following findings:
- R’s claim to have been shocked at the existence of the guarantee was overcooked given that there was a consistent course of dealings on other matters where he had given a personal guarantee. In fact, when grilled by the landlord’s counsel, he had stated that, in general terms, where a business of his could not be supportive of a lease, then he would give a personal guarantee
- It was normal in R’s relationship with H that R would not be involved in the details or know the principal terms of a business arrangement
- The judge recited a menu of 42 different legal documents where R’s signature had been affixed by the machine and concluded that its extensive use made it inherently likely that he had known of its existence
- It was not proven that R knew specifically about the existence of this particular guarantee but the judge held that R gave H extensive, if not total, trust to deal with his business affairs and those of the company. That authority extended to the guarantee in question.
Consequently, the guarantee was upheld and R remains a guarantor to the lease. With an annual rent of £640,000 per annum and over £1m in legal costs, R is in the soup!
To stay out of the soup always ensure that:
- an agent’s remit is kept explicitly clear
- anything requiring a signature is at least brought to the signatory’s attention and, preferably, their explicit consent is obtained before using any ghostwriting machine to sign on their behalf.
To do otherwise could be a recipe for disaster.