UK: Case Update: Ramsay v Love

In the recent case of Ramsay v Love [2015] EWHC 65 (Ch), the celebrity chef Gordon Ramsay was found to be bound by a personal guarantee given to a landlord, even though he had not physically signed the guarantee document.

Background

A lease over a prominent building near Regent's Park which now contains the York and Albany restaurant and hotel was granted to Gordon Ramsay Holdings International Ltd (GRHI) in February 2008. The lease was for 25 years and the yearly rent was set at Ł640,000 per year with an upwards only rent review every 5 years during the term.  The lease was guaranteed by Gordon Ramsay Holdings (GRH) and Mr Ramsay personally.  Mr Ramsay's signature was written on the counterpart lease by an automatic signature machine. The machine was kept at the offices of GRH. Mr Ramsey's father- in-law, Mr Christopher Hutcheson, was the Chief Executive Officer of GRH.

In relation to the lease and the guarantee, both GRHI and GRH accepted that they were bound as lessee and guarantor respectively. However, in September 2011, Mr Ramsay stated that he was not bound by the guarantee. Mr Ramsay's position was that he should not be bound as he did not sign the deed—his signature had been placed on the document by Mr Hutcheson, through use of the signature machine, without authority from Mr Ramsay.

Can a ghost signature be effective?

This question was not raised by either party before the court, but the judge chose to address it despite this, for the avoidance of doubt.  Both parties accepted that if Mr Ramsay had operated the signature machine, the signature would have been effective. It was also accepted by both the claimant and defendant that if Mr Ramsay had expressly authorised another person to operate the signature machine, then the deed would have been effectively signed by Mr Ramsay.  The judge referred to 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. The presiding judge found that Firstpost was not authority as regards the permissibility of signing machines being used.

Guarantee or indemnity?

Mr Ramsay's counsel had initially raised, as a side issue, the question of whether the guarantee in question was a guarantee or an indemnity.  If a document constitutes a guarantee, the provisions set out in section 4 of the Statute of Frauds Act 1677 (the Act) apply. This states that a guarantee must be evidenced in writing by a document which is 'signed' by or on behalf of the guarantor.  However, in this case, the disputed 'guarantee' actually constituted a guarantee and indemnity, and so the Act did not apply (since section 4 of the Act cannot apply to a contract of indemnity1).

Was Mr Ramsay bound by the guarantee?

The judge then went on to consider the following questions:

  • Did Mr Ramsay know about the guarantee?
  • Did Mr Hutcheson have authority to commit Mr Ramsay to the guarantee?

On the first question, the judge agreed with Mr Ramsay's evidence that he did not generally know the details of all business transactions entered into by the group companies on his behalf. He held that Mr Hutcheson did not routinely inform Mr Ramsay about matters of detail, that Mr Ramsay did not expect this and knew he was not being kept informed.  Under cross-examination, counsel for the defendant obtained from Mr Ramsay a statement that "if the business could not be substantially supportive on that lease, then I [Mr Ramsay] would give a personal guarantee". The court found that this, combined with financial evidence showing that GRH was operating at a loss, established that this was clearly a case where Mr Ramsay would be expected to give a personal guarantee.

The judge considered on the evidence that, although Mr Ramsay was "not really involved in the detail of the negotiations to acquire the lease of the premises...he was enthusiastic about the premises. He liked them and their potential" and that had Mr Hutcheson asked him to give a personal guarantee it was likely he would have agreed. The judge found that Mr Ramsay's claim to have been shocked at the existence of the guarantee was not credible, given that there was a consistent course of dealings on other matters where he had given a personal guarantee. However, the judge's conclusion was that it was not proven on the balance of probabilities that Mr Ramsay did know of the intended guarantee prior to the grant of the lease.

On the second question; whether Mr Hutcheson had sufficient authority to bind Mr Ramsay by use of the signature machine, the judge held that it was normal in Mr Ramsay's relationship with Mr Hutcheson that he would not be involved in the details or know the principal terms of a business arrangement.  A review by the court of 42 different legal documents where Mr Ramsay's signature had been affixed by the signature machine, correspondence relating to the execution of documents and cross examination of Mr Ramsay, led the judge to conclude that it was likely that he had known of the existence of the machine and also that it was routinely used to place his signature on legal documents.  Even if Mr Ramsay had not known explicitly about the existence of this particular guarantee the judge held that Mr Ramsay had given Mr Hutcheson 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 Mr Ramsay remains a guarantor to the lease.

Comment

This case serves as a salient reminder of the importance of ensuring an agent's remit is kept explicitly clear. Mr Hutcheson had wide authority in a business context, which was probably intended.  However the lines became blurred with regard to personal matters. Mr Hutcheson had authority to act on behalf of Mr Ramsay personally, as distinct from as a company. However, this was in respect of business matters. His authority did not extend to domestic or non-business matters. In the current case, the personal guarantee was considered clearly to be a business matter. 

Further, this case confirms that a ghost signature can effectively bind a party to a document. Therefore it remains fundamentally important that anything requiring a signature is at least brought to the signatory's attention and, preferably, their explicit consent is obtained before using any signature writing machine to sign on their behalf. 

Footnotes

1 Chitty on Contracts, 31st ed., paragraph 44-043

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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