The Wealth Finance Brief - March 2015
- Lending to Individuals
- Execution of Guarantees
- Sovereign Immunity: considerations for lenders
- Duties to not facilitate fraud
- MiFID II: A Summary
- Taking Security Over IP
Seeking to enforce and make demand under a personal guarantee can be a minefield and we have previously written on the execution requirements of a guarantee and the importance of the guarantor obtaining independent legal advice: please see our briefing paper entitled "Enforcing Against a Personal Guarantor". However, the recent case of Gordon James Ramsay v James Love held that an individual was bound by the terms of a personal guarantee even though he had not executed the document himself: it had been executed by a signature machine used by a business colleague on his behalf.
In this case, Mr Hutcheson was a long term business partner (and the father-in-law) of Mr Ramsay who was charged and trusted with the management of Mr Ramsay's businesses. The personal guarantee in question was required in connection with the lease of certain London premises where Mr Ramsay was to run a restaurant and small hotel. The High Court's decision as to whether Mr Ramsay was bound by the guarantee apparently given by him (but executed by Mr Hutcheson through the use of a signature machine) was principally a question of fact as to whether Mr Hutcheson did or did not have actual authority to commit Mr Ramsay to the guarantee.
Based on the following evidence:
- Mr Ramsay (the "principal") and Mr Hutcheson (the "agent") had a 20 year business relationship, strengthened by their family relationship and Mr Hutcheson's role was to manage Mr Ramsay's businesses;
- Mr Ramsay did not expect Mr Hutcheson to keep him informed of the details of the business transactions, and Mr Ramsay knew that he was not being kept informed;
- Mr Ramsay was aware of Mr Hutcheson's practices to use a signature machine to execute his signature on legal documents; and
Mr Ramsay had previously given similar contractual undertakings (also in relation to leases of premises) through Mr Hutcheson,
the High Court held that the agent "plainly had extensive authority" to enter into a personal guarantee on the principal's behalf. According to their previous business undertakings together, there were no express or specific limitations on the agent's ability to deal with any business or contractual matters. Consequently the agent had not exceeded his authority and the principal was therefore bound by the guarantee.
- Where there is an agency arrangement between business partners, principals should create a clear record of the scope of their agents’ authority, in order to avoid and/or manage any disputes as to whether an agent is so authorised or not.
- Signature machines can effectively bind a party to a guarantee and indemnity if there was appropriate authority to use it.
- Notwithstanding the above, in situations where a principal has not personally signed a deed or document, we would always advise a lender to obtain evidence (by way of board resolution, power of attorney or otherwise) that the signatory has been duly authorised to execute such deed or document on behalf of the principal.
Gordon James Ramsay v Gary Love  EWHC 65 (Ch), 20 January 2015
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