Company – Execution of documents – Signature – Parties entering into contract for sale of first respondent company’s property to appellants – Both company and authorised signatories named as sellers – Individual signatories executing document without affixing common seal of company – Whether execution of document effecting sale of land – Whether validly executed contract binding respondents – Appeal dismissed
The appellants agreed to purchase a residential property that had been divided into five flats let on long leases. Under the contract, the appellants purportedly agreed to purchase the freehold interest in the building from the first respondent company and the leasehold interests from the leaseholders, who were directors of and shareholders in the first respondent. The parties entered into a contract and supplementary agreement that defined the first respondent as the “seller” and the appellants as the “purchasers” and bore various signatures under the heading “SIGNED… SELLER”, including those of two of the first respondent’s authorised signatories. The latter were also defined as “sellers” in respect of the sale of their leasehold interests in two of the flats. The documents did not bear the first respondent’s common seal or separate signatures stated to be “for or on behalf of” the first respondent.
The appellants refused to complete the purchase, claiming that the agreement was invalid because it did not contain words expressly stating that the signatures of the signatories were “by or on behalf of” the first respondent for the purposes of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 and section 44(4) of the Companies Act 2006.
When the respondents sought to enforce the contract, it was held that the relevant agreement had not been executed by the first respondent and was therefore not binding on it. The respondents’ appeal against that decision was allowed on the ground that a reasonable reader would have appreciated that the signatories had signed both on their own behalf and on behalf of the first respondent.
The appellants were granted permission for a second appeal. They argued that the first respondent had not executed an agreement within the meaning of section 44 of the 2006 Act since the words used in the contract did not indicate that the first respondent was executing it.
Held: The appeal was dismissed.
For a document to have the same effect as if executed under the common seal of the company, section 44(4) required not only that it be signed on the company’s behalf by two authorised signatories, in accordance with subsection 2, but also that it be “expressed in whatever words to be executed by the company”. Those words had to add something to the subsection (2) provisions, although they did not require, in addition to the signatures of the individuals who were the authorised signatories, words spelling out that those signatures were “by or on behalf of” the company.
The first respondent had been defined as “seller” and the signatures of two authorised signatories appeared under the words “SIGNED… SELLER”. In those circumstances, notwithstanding the absence of a statement that the signatures had been given “by or on behalf of” the company, it would be absurd to say that the contract for the sale of the freehold by the first respondent was not expressed to be executed by that company. If the company was defined as the “seller”, the signatures at the end of the agreement under the words “SIGNED… SELLER” could mean only that the document was expressed to be executed by the company.
There was no sensible reason why the legal position should be any different where the freehold and the leasehold transactions were combined in the same document, the authorised signatories being parties to the contract and the defined term “the seller” including both the individual leaseholders and the company, especially when the relevant statutory provisions were intended to expand the range of formalities that would count as execution by a company.
That was a simple case within subsection (4): the signatures to the supplementary agreement were under the words “SIGNED… SELLER”; “SELLER” was defined in the supplementary agreement as including both the company selling its freehold and the individuals selling their leaseholds. The signatures included those of two authorised signatories and the use of the defined term “SELLER” above those signatures meant that the document was expressed to be simultaneously executed both by the first respondent and by the individuals, all being included in the term “SELLER”.
Per curiam: Expensive and long-drawn-out litigation over the execution of a document by a company could be avoided by taking greater care to comply with the formalities at the time of execution by adding words that expressly stated the capacity in which an individual was signing a document to which a company was a party.
Timothy Dutton (instructed by Bircham Dyson Bell LLP) appeared for the appellants; Evan Ashfield (instructed by Davies Battersby) appeared for the respondents.
Eileen O’Grady, barrister
