More Company Signings. Impossible – Maybe. Metaphysical – Definitely
In my blog last month link here I considered the Court Decision in the case of Hilmi – where a notice intended to be made by a Company which wanted to claim its right to purchase a freehold of its leasehold premises, was found by the Court to be defective.
The Notice was signed by a Director of the Company. However, it was held by the Court not to have been signed by the Company!
As the Judge remarked his task was to decide ”whether the Notice was, as required by Statute, one which was signed by the Company or was it only signed on behalf of the Company?
“In relation to a corporate entity which cannot itself hold a pen and apply it to a piece of paper, this may seem a somewhat metaphysical enquiry. But it is one which the law requires to be considered, on occasion, although perhaps only very rarely. This is such an occasion.”
Yes that old “Law / Metaphysics” conundrum.
So we have learned that a Company may have failed to sign a document which it certainly wished to sign, when it is signed by a Director alone.
So who’s for a recent case where a Company was held to have properly signed a document which it now wishes it hadn’t, when it was signed by one Director alone.
[Alice laughed. “There’s no use trying,” she said: “one can’t believe impossible things.”
“I daresay you haven’t had much practice,” said the Queen. “When I was your age, I always did it for half-an-hour a day. Why, sometimes I’ve believed as many as six impossible things before breakfast.]
The case of Bass Jarrington Ltd v The Royal Bank of Scotland plc  WL 6633457 considered the ability of the Bank to claim the benefit of a Guarantee signed by one Director only. And what is more, that Director appears to have signed without the authority of the Board of the Company and in breach of his duty of good faith towards the Company
In this case, because the Guarantee was the sort of thing, executed in the sort of manner, that was usual in dealings between the Company and the Bank, and because there was no evidence that the Bank had any reason to believe that the Company had not considered the matter at Board level and had not authorised the signing Director to do so, the Court refused to declare that the Guarantee was void.
The result is a confirmation of the Court’s view that a Contract entered into by a DIRECTOR [not a non-Director employee however senior] will bind the Company to it provided of course that the third party is unaware of any irregularity.
I cannot reconcile these cases directly to each other, but the lesson of them for Directors is probably what you already suspected. Viz: – There is one way to get things right and there are many are more ways to get things wrong. And, you are more likely to get things right if you always adhere to a model of Good Practice.
In Hilmi, the Notice would have been valid if witnessed or better still signed by two or more Directors.
Similarly, in Bass, the Bank would not have been able to benefit from the Guarantee signed by one rogue Director if, in its relationship code with the Bank, the Company had specified that all contractual documents between them must bear the signature of at least two Directors.
So the one common thread seems to be:-
1 your Company’s important documents should always bear the signature of two or more Directors.
2 Your third party suppliers, Bankers, Clients etc should be told that they are asked to insist upon, and may only rely upon, documents and papers which have the signatures of two or more Directors.
Turning the thing around, it also follows that a Director is much safer, in his relationship with the Company and in respect of his own personal liability, if he only signs paper as one of two or more signatories and always with the protection of a minuted Board resolution to proceed with the particular transaction
Of course, most Directors and Companies are very busy and will consider they haven’t the time for all this administrative box ticking. Fine. But remember, just because you haven’t fallen through it yet, doesn’t mean you are skating on thick ice.
That’s enough impossible things to believe for today.
Except that there is a lion in the box link here
If you would like to have your Company’s Notarial work done properly, do please get in touch – You can contact me or Louise here at AtkinsonNotary E7 Joseph’s Well Leeds LS3 1AB, phone 0113 8160116 and email email@example.com