You may remember that personality chef Gordan Ramsay was in the news recently for a non-food related story when the High Court held that a personal guarantee given by Ramsay had been validly excuted, even though it had been signed by Ramasay personally. This case is a useful reminder for businesses on the implications of using agents in transactions.
The background was that Ramsay’s company, Gordon Ramsay Holdings International Ltd, had taken a lease of The York and Albany Pub in London. As part of the arrangement, Ramsay was required to personally guarantee the Lease’s annual rent of £640,000.
Chef Ramsay had left the Lease negotiations and management of the business purely down to his father in law as his agent. This was a usual course of action between the two which had existed over their twenty year working relationship together. Ramsay did not expect his father in law to be keeping him updated and was aware that legal documents would often be signed on his behalf by his father in law using a ghost writing machine.
When an attempt was made to enforce the personal guarantee, Ramsay queried the enforceability on the basis that he has not signed the personally. The High Court rejected this arguement. It found that as a result of Ramsay’s long standard working relationship with his father in law and the fact that there had been numerous previous dealings where legal documents were executed by his father in law using this machine, there was sufficeint and extensive authority for the father in law to execute the personal guarantee on behalf of Ramsay using the machine. Therefore Ramsay was bound to guarantee the annual rent payable in terms of the lease.
This case provides a gentle reminder for businesses who use agents in transactions to ensure that they create clear and adequate guidelines on what their agents can and cannot do (or sign) in order to avoid similar disputes arising. The high Court commented that if there had been clear signs in previous dealings between Ramsay and his father in law of limitations on the father in law’s authority then this would have helped Ramsay’s cause. However there was not. The message is therefore to ensure that you limit the authority of your agent where necessary.