Ramsay Gets His Just Dessersts
In 2008 Gordon Ramsay’s Company, Gordon Ramsay Holdings International Limited, took a lease of the York & Albany Pub and Restaurant in Parkway in Camden Town for a term of 25 years at an initial rent of £640,000 per annum. The obligations of the Company were personally guaranteed by Gordon Ramsay himself pursuant to a written Guarantee, or were they?
Gordon Ramsay claimed he had not been asked to give any personal guarantee and he had not given one. He alleged that his father-in-law had agreed to give the guarantee without his authorisation and had used a Signature Machine to apply his signature to the Guarantee. He asked the Court to declare he was not bound by the Guarantee.
His father-in-law, Christopher Hutcheson, had run the business for many years before spectacularly falling out with Mr Ramsay in 2010 when he was accused of serious fraud and was dismissed as Chief Executive. Gordon Ramsay was often abroad and spent very little time in the Company’s offices and was often not consulted about business matters.
Mr Hutcheson had no Contract of Employment and there was no document that identified the scope of his authority. Mr Ramsay described him as a “control freak” who controlled not only Mr Ramsay’s business but his life as well. Mr Hutcheson owned 30% of the shares in the Company.
In 2007, the Company had bought 2 Ghostwriter Manual Feed Signature Machines. Either a felt tip pen, or another pen which gave the appearance of a fine knib having been used, could be fitted to replicate Gordon Ramsay’s signature and save him from personally signing books and photographs or documents and cheques.
Gordon Ramsay claimed in 2011 that one of the Machines had been used without his knowledge or authority to sign the Guarantee. The investment in this venture was loss-making and he was clearly concerned about his liability as a guarantor. His case was that the Guarantee was ineffective as it was not signed by him personally and Mr Hutcheson did not have his authority to give any personal guarantee anyway.
The Court had some difficulty in piecing together all the background information as much of the documentation was missing. Mr Ramsay claimed that Mr Hutcheson had removed large quantities of documents and deleted e-mails when he was dismissed.
The Court made the following findings of fact:
- The Machines were used to sign many legal documents. They had been used to append Mr Ramsay’s signature to the Agreement for Lease and the Lease of the premises.
- It was untrue for Gordon Ramsay to claim that he did not know the Machines were used to sign legal documents, including personal guarantees, on his behalf.
- However, there was no direct evidence that Mr Ramsay knew he was giving the Guarantee in this case and no basis to refute his evidence he did not know one was required.
- Because of the financial position of the Company, it was normal for its obligations under leases to be guaranteed by Mr Ramsay.
- Although he played little involvement in the transaction, Mr Ramsay was keen to acquire these premises for development into a restaurant and a hotel. There was also stiff competition for it. He was aware of the negotiations for the Lease.
- The landlord would not have let the premises to the Company unless Mr Ramsay gave a personal guarantee. The Company’s accounts at the time showed an overall loss of £2.5 million for the year ended 31 August 2005 and net current liabilities of £5.5 million.
- The personal guarantee had not been given without any thought or consideration by Mr Hutcheson. It was possible to limit it to 2 years rent by providing a rent deposit for this amount in place of the guarantee.
- Mr Ramsay had placed complete trust in Mr Hutcheson and allowed him to deal with both corporate and personal matters without any prior consultation or any explanations being provided.
- Mr Hutcheson had unlimited general authority to act for the Company and Mr Ramsay in relation to business matters. Mr Ramsay had made clear he had limited business acumen and relied heavily on his father-in-law.
- If asked, Mr Ramsay would have agreed to give the Guarantee.
Accordingly, the Court held that Mr Hutcheson had authority to commit Mr Ramsay to give personal guarantees and the Guarantee in question was given in accordance with such authority. It was not given, as Mr Ramsay claimed, fraudulently or dishonestly by Mr Hutcheson. It was given in the context of Mr Ramsay wanting to acquire the Lease and being generally prepared to personal guarantee the obligations of the Company to landlords and to banks.
Moreover, the Court held that it was not necessary for a guarantor to sign a guarantee personally. A signature writing machine would suffice even though not operated by Mr Ramsay personally. However, it was essential that any signature was affixed with the actual authority of the Guarantor. If Mr Hutcheson had not had actual authority to commit Mr Ramsay to the Guarantee, it would not have been binding on him.
So, the Court held the Guarantee to be effective and binding.
- A Guarantor can be liable under a Guarantee even though he/she has not personally signed it.
- When dealing with representatives of any person, it is important to establish they have the requisite authority to act for that person, or to deal with the person direct.
- Companies should set out clear written limits on the extent of the authority of their Directors and officers.