The judgment by a single high court judge in R (on the application of Mercury Tax Group Limited & Anor) v HMRC & Ors [2008] EWHC 2721 has cast doubt on the validity of attaching a pre-signed signature page to a subsequently negotiated document.

The case brought by HM Revenue & Customs (HMRC) concerned a tax fraud allegation in which HMRC was looking for grounds to invalidate a tax-reduction scheme. The evidence put before the court revealed that the defendants' solicitor had obtained his clients' signatures on draft form documentation which provided for the purchase of 2003 gilts. An analysis of the final form documentation, which had taken a number of months to agree, indicated that the defendants had actually purchased 2004 gilts which had a different yield and pricing mechanism. They had not executed the final form documents. Instead, the signature pages of the draft documentation were appended to the final form documents.

The objection of Mr Justice Underhill, the high court judge, was to the "recycling" of the signature pages of the draft documents for use in the final form documents. Although the scheme had essentially the same tax effect as had been originally intended, the detailed terms of the agreements had changed and the final form documentation should have been executed, not least to give some protection to the parties against fraud or mistake. The judge noted that the parties clearly intended that signature of the documentation was an essential element in the effectiveness of those documents.

Each of the documents was intended to be a deed. Mr Justice Underhill considered whether execution and delivery of the documentation had taken place in accordance with section 1(3) of the Law of Property (Miscellaneous Provisions) Act 1989. It was found that the formalities for a deed do not permit the insertion of pre-signed signature pages into final form documentation.

Mr Justice Underhill concluded that the recycling of signature pages had rendered the agreements ineffective and that the formalities for a deed had not been followed.

The judgment re-iterates what ought to be good practice. See Wragge & Co's action points for some practical measures to ensure agreements are watertight.