The recent and much publicised failed attempt by celebrity chef Gordon Ramsay to escape from the obligations of a lease guarantee gives food for thought.
In 2007 Northam Worldwide Limited granted a lease of the York and Albany pub, near Regent’s Park, to Gordon Ramsay Holdings International Limited, with Gordon Ramsay Holdings Limited and Gordon Ramsay acting as guarantors. The lease was for a term of 25 years at an annual rent of £640,000. Gordon Ramsay claimed that he was not bound by the guarantee contained in the lease, as he did not sign the lease, his signature having been placed on the lease by means of a signature writing machine operated by, or under the direction of, his now famously estranged father-in-law, Christopher Hutcheson (who was the chief executive officer of Gordon Ramsay’s company and also Gordon Ramsay’s business manager at the time), and that he was unaware of the details within the lease. Gordon Ramsay claimed that Mr Hutcheson did not have authority to place Gordon Ramsay’s apparent signature on the document, although it was accepted that, if Gordon Ramsay had operated the machine himself, this signature would have been valid.
After a lengthy eight day hearing, the court decided, with reference to historic evidence and to previous use of the signature writing machine, that Mr Hutcheson did have Gordon Ramsay’s authority to commit him to the lease guarantee on his behalf. The judge dismissed Gordon Ramsay’s claim that he thought that the machine was used for the purposes of signing only merchandise and cookbooks as entirely implausible.
Food for thought
The case raises concerns for parties entering into a contract. In the Ramsay case, the landlord was presented with an inked signature of Gordon Ramsay which the landlord understandably thought he could rely upon. Although in the Ramsay case Mr Hutcheson did have authority to enter into the lease on behalf of Gordon Ramsay using the handwriting machine, this may not always be the case. This creates an extra element of uncertainty for a party entering into a contract unless the contract is signed in the presence of all parties, or a solicitor confirms that it has been correctly signed.
The facts of the case demonstrate the binding nature of acts by an agent on behalf of a principal, and the case highlights the importance of always ensuring that an agent’s remit is explicitly clear by giving actual authority granted by formal powers of attorney, board resolutions or letters setting out the scope of the agent’s authority.
Finally, given the onerous terms of a lease guarantee (which is a promise by the guarantor to fulfil the tenant’s obligations in the lease if the tenant fails to do so) the case is a reminder that very careful consideration should be given by a guarantor when asked to provide a guarantee under a commercial lease.
For further information regarding this topic or any other property and construction matter, please contact the Edwin Coe Property team.
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