Gordon Ramsay bound by ghost signature of guarantee

Authority of agent to sign documents

A key point of the case was whether or not Mr Hutcheson had authority to commit Mr Ramsay to a personal guarantee that he may not have been aware of. The case discussed in detail whether or not, as a matter of fact, Mr Ramsay knew the guarantee existed. It was agreed that Mr Ramsay did not generally know the details of all business transactions entered into by the group companies, even when entered into by Mr Ramsay personally. Mr Hutcheson did not routinely inform Mr Ramsay about matters of detail—Mr Ramsay did not expect this and knew he was not being kept informed. As Mr Hutcheson was also Mr Ramsay's father-in-law, there was an additional element of trust in their relationship. Further, Mr Ramsay had agreed with Mr Hutcheson generally that if a business could not be substantially supportive on a lease, Mr Ramsay would be prepared to give a personal guarantee—Mr Ramsay was also enthusiastic enough about this particular lease that the judge believed that had Mr Hutcheson asked him to give a personal guarantee, it was likely he would have agreed.

Regarding Mr Hutcheson's authority to act on behalf of GRH or GRHI, there was no limitation on his general authority to act for these companies. Mr Hutcheson also had Mr Ramsay's authority to put his signature on documents as a director of GRH and of GRHI. However, the question is whether Mr Hutcheson also had authority to bind Mr Ramsay personally. In course of dealings, Mr Hutcheson did seem to have extended authority to make contracts on behalf of Mr Ramsay but this authority would not extend to non-business or domestic matters. However, the court ruled that the guarantee, although personal, was very much a business-related matter since the guarantee was required in order to acquire a lease for premises which the company and Mr Ramsay were keen for the company to acquire. Therefore, in committing Mr Ramsay to the guarantee in the lease, Mr Hutcheson was acting on the general authority conferred upon him by Mr Ramsay, which did extend to agreeing a personal guarantee where the business required it. Therefore, Mr Ramsay was held to be bound by the terms of the guarantee.

Can a ghost signature be effective ?

It was accepted that if Mr Ramsay had operated the ghost signing machine, the signature would have been effective. For the purpose of signing a document (and, in particular, a deed) creating a guarantee, the guarantor does not need to hold the pen in his hand to sign the document. Therefore, it seems a ghost signing machine can effectively sign a document.

As a side issue, it is important to consider whether the guarantee in question was a guarantee or an indemnity. If a document constitutes a guarantee, the provisions set out in the Statute of Frauds (1677) apply—section 4 states that a guarantee must be evidenced in writing by a document which is 'signed' by or on behalf of the guarantor. The judge referred to, in particular, Firstpost Homes Ltd v Johnson [1995] 4 All ER 355 where it was suggested a document could only be 'signed' by an executing party and that such 'signing' must be with a pen in his own hands. Firstpost does not explicitly refer to ghost signing machines. However, in this case, the disputed 'guarantee' actually constituted a guarantee and indemnity, and so the Statute of Frauds (1677) did not apply since this cannot apply to a contract of indemnity.

What are the implications of the case for lawyers?

This case emphasises the importance of clearly setting out what an agent can and cannot do. In this case, Mr Hutcheson had wide authority to commit Mr Ramsay to personal guarantees where these were seen as helpful to the business. The court distinguished clearly between personal matters relating to the business and domestic matters, and it was only in the latter matters that Mr Hutcheson would not be considered as having authority to act as agent of Mr Ramsay.

Further, this case sets out that a ghost signature can effectively bind a party to a document. This is helpful for practitioners as it may be that with the increased use of counterparts being signed in the market rather than originals at a 'signing' meeting, documents may be signed by machines without the awareness of parties to that agreement. The ghost signature machines that were used to place Mr Ramsay's signature on documents used pens that gave the appearance of a pen with a fine nib being used. A practitioner receiving a document would typically compare the signature to a specimen signature and may also notice that it looks as if a 'pen' has produced the mark, but this judgment indicates that it would not be necessary to confirm that the person indeed made that signature with his own hand. A practitioner is also likely to have checked that the person signing the document had authority to sign that document, but again would not have to confirm that such party had signed it with their own hand.

Emma Millington, solicitor in the Lexis®PSL Banking & Finance team.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

First published on LexisPSL Banking & Finance. Click here for a free trial.