Last week, celebrity chef Gordon Ramsay failed in his claim in the English High Court that he was not liable under a personal guarantee and indemnity (the “guarantee”) purportedly given by him in respect of a lease acquired by his holding company, Gordon Ramsay Holdings International Ltd, of a pub near Regent’s Park in London.

Signing by machine

During the hearing, it transpired that the signature to the guarantee was not hand written by Ramsay himself but by a Ghostwriter machine. Ghostwriter machines are not the stuff of science fiction. They are often used by celebrities and royalty to sign documents on their behalf. However, these documents generally tend to be books and invitations from busy people that do not have time to personally sign hundreds, if not thousands, of autographs a day and the machines are not usually used for legally binding documents.

Ramsay claimed that the guarantee was given without his authority by his father-in-law, Christopher Hutcheson, who was chief executive officer of one of his companies and that his signature had been put on the guarantee by the Ghostwriter machine without his consent.

Authority to act on behalf of Ramsay

At the time, Hutcheson ran most of the celebrity chef’s business and, it was generally accepted, had wide authority to act on Ramsay’s behalf in commercial matters relating to it, including the authority to bind him to commercial contracts.

The evidence showed that Ramsay knew his signature was frequently and routinely placed on legal documents without his express permission by Hutcheson using the Ghostwriter machine. Ramsay also accepted that he was not generally informed of and did not expect to be kept informed of matters of detail pertaining to the business from Hutcheson. Ramsay had also previously agreed with his father-in-law that he would be prepared to give personal guarantees for a lease if the business itself could not support the lease on its own and Ramsay had done so in the past.

However, Ramsay asserted that although he was aware and had given authority for his father-in-law to place his signature on other legal documents using the Ghostwriter for business transactions, of which Ramsay did not generally know the details; in this case, Ramsay said that Hutcheson did not have such authority to act.

The court held therefore that the “principal dispute in this case is one of fact as to whether Mr Hutcheson did or did not have actual authority to commit Mr Ramsay to the guarantee in this case”.

Judgment

Ramsay lost the case. The court held that Hutcheson, who was CEO of Ramsay’s company at the time, had the authority to commit Ramsay to the personal guarantee on his behalf. The court found that Hutcheson did not have any limitation on his general authority to act on behalf of the business and had Ramsay’s authority to put his signature on legal documents as a director of the business. The court further found that although Hutcheson’s wide authority was to act on behalf of the business, the personal guarantee in this regard was not a non-business matter since it was required in order to acquire the leases which Ramsay himself was very keen to do.

Implications

Can a ghost signature be effective?

Yes. The court held that 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 writing machine can effectively sign a document.

With the increased use of counterparts and electronic signings, there is a risk that documents may be signed by machines rather than the actual persons by hand, without the awareness of the other parties. The Ghostwriters in this case used pens that gave the appearance of a pen with a fine nib being used. When receiving a signed document, one would generally compare the signatures placed on the signed documents, note that it looks as if the signatures were placed by a pen (and is therefore an original document) and compare the signatures to the list of authorised signatories and their specimen signatures to determine their authenticity. This judgment indicates that it would not be necessary to confirm that such signatures were also placed on that document by the own hand of the signatory to create a binding obligation on the party whose signature appears on that document.

Judgment excerpts [paragraph 7]:

“It was accepted that for the purpose of signing a document (and, in particular, a deed) creating a guarantee, it was not necessary that the guarantor should sign the document with a pen held in his own hand. It was accepted that if Mr Ramsay had himself operated the signature writing machine to place his signature on the deed, then the deed would have been effectively signed by him. Similarly, it was accepted that if Mr Ramsay had expressly authorised another person to operate the signature writing machine to place Mr Ramsay’s signature on the deed, then the deed would have been effectively signed by Mr Ramsay.

Section 1(3) of the Law of Property (Miscellaneous Provisions) Act 1989 states that a deed must be “signed” by an executing party. There are statements in the authorities which suggest that a document is only “signed” by an executing party when he signs it with a pen in his own hand: see Firstpost Homes Ltd v Johnson [1995] 1 WLR 1567 at 1575 and 1577, citing Goodman v J Eban Ltd [1954] 1 QB 550 at 555 and 561. However, those statements were not designed to distinguish between signing by use of a pen held in the executing party’s hand as distinct from the use of a signature writing machine. Further, no point was taken as to the requirement in section 1(3) of the 1989 Act that the deed be signed by the executing party in the presence of an attesting witness.

In any case, a guarantee can be entered into otherwise than by deed. Initially, counsel for Mr Ramsay did refer to section 4 of the Statute of Frauds Act 1677, which states that a guarantee must be evidenced in writing by a document which is “signed” by or on behalf of the guarantor and some point was sought to be made about the application of section 4. However, it was pointed out that the disputed “guarantee” in this case was a guarantee and indemnity and that it has long been established that section 4 did not apply to a contract of indemnity (see Chitty on Contracts, 31st ed., paragraph 44-043), so any possible point under section 4 fell away. At this point, I should explain that I will for convenience in this judgment refer to the disputed obligation in this case as “a guarantee” even though, more technically, it is a contract of indemnity.”

Execution of a Guarantee as opposed to a Guarantee and Indemnity

The court re-affirmed the distinction between the execution methods to be adopted when executing a standalone guarantee as opposed to a guarantee and indemnity. Most commercially drafted guarantees (for example, in facility agreements) are drafted as a combined guarantee and indemnity.

The court held that the execution of a standalone guarantee (without indemnity) would be governed under s4 of the Statute of Frauds Act 1677, which states that “a guarantee must be evidenced in writing by a document which is “signed” by or on behalf of the guarantor”. However, where the “guarantee” is an indemnity, as was in this case, s4 of the 1677 Act does not apply (see Chitty on Contracts, 31st ed., paragraph 44-043).

A guarantee can effectively be created and validly signed in accordance with s4 of the 1677 Act by writing your name at the end of an email confirming the terms of that guarantee (see Golden Ocean Group Ltd v Salgaocar Mining Industries PVT Ltd [2012] EWCA Civ 265).

Authority of agents

This case also highlights the importance of clearly setting out what agents can and cannot do. Any powers of attorney or other documents granting authority to any person to act as agent should be carefully reviewed and limitations should be clearly set out. It may also be relevant to consider whether any specific reference should be made in such documents to methods of execution of documents and the use of ghost writing machines to create binding legal contracts.

Case citation: Gordon James Ramsay v Gary Love [2015] EWHC 65 (Ch)