Corporate and banking transactions, particularly more complex or multi-national deals, often present difficulties as regards signing arrangements. The availability of signatories at a certain time or the need to make a post-execution amendment can prompt the parties to look for alternative ways to deal with completion formalities.
A recent English High Court case, R (on the application of Mercury Tax Group and Another) v HM Revenue and Customs, ruled out one possible alternative by confirming that re-attaching an executed signature page to a modified deed will not create a valid, binding and effective deed.
The case involved the execution of signature pages whilst the deed in question was still in draft form. After execution, and without notifying the signatories, certain material changes were made, square brackets were completed and the name of the trustee was inserted. The court considered the Law of Property (Miscellaneous Provisions) Act 1989 which provides for execution of deeds. The consensus was that "the signature and attestation must form part of the same physical document" and, therefore, that the deed had not been validly executed.
It should be noted that the case specifically concerned English deeds, although the court also cast doubt on whether the practice would be effective in respect of simple contracts. The court's comments were limited to the facts of the case before it and commentators have suggested that the parties to such contracts might take a pragmatic view depending on their circumstances. Specifically, it has been suggested that caution should be taken in instances where the parties envisage a process culminating in the signature of a binding agreement but this has been contrasted with instances where there is no requirement for a contract to be in writing. It does, however, remain best practice to avoid the transfer of signature pages from one version of a contract to another.
A distinction has also been drawn between the failure to properly enter into a deed or simple contract and varying such a document which has already been properly entered into. Existing case law which provided for variation by the parties remains good authority, however parties are not permitted to create a "clean" copy of an amended contract and to transfer original signature pages to that clean version.
Although Mercury Tax is an English case, it should be noted that it will be relevant to Scottish companies entering into English deeds. A foreign company, however, may still be able to sign pages of English documents in advance of finalising the document provided that this is allowed under the laws of the country in which that company is domiciled.
Signing formalities in Scotland are governed by the Requirements of Writing (Scotland) Act 1995. As this wording of this Act, like the Law of Property Act considered in the Mercury Tax case, infers a signature being applied to the document itself, it is likely that the courts in Scotland would take a similar approach to the English courts as regards signature pages being attached to modified documents.
In failing to execute documents in the proper manner, the parties risk ending up with an invalid document. In all cases parties should avoid signing pages that do not form part of a complete finalised document. Signing practicalities should be considered carefully in advance of completion of a transaction and regard should be given, for example, to whether powers of attorney should be granted to avoid any of the difficulties encountered in this case. The case also highlights the importance of careful maintenance of whole original documents post completion.
The Law Society Company Law Committee and The City of London Law Society's specialist Company Law and Financial Law Committee are to draft (non-binding) guidance on execution and completion practices following on from the Mercury Tax case.