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Ramsay v Love [2015] EWHC 65 (Ch)

Published May 2015

The Ghost Writer Case: Ramsay v Love [2015] EWHC 65 (Ch)

Jonathan Seitler QC and Benjamin Faulkner acted for Gordon Ramsay

In November last year, the trial of Gordon Ramsay’s claim against the landlord of one of his restaurants, Gary Love, was heard in the Chancery Division. As has been widely reported in the press, Mr Ramsay’s business operations had been controlled by his father in law, Chris Hutcheson, before Mr Hutcheson’s various allegedly fraudulent activities were rather publicly revealed, and Mr Hutcheson was expelled from the business. Mr Ramsay’s claim was that during his period of control of the business Mr Hutcheson had taken a step too far, by purporting to bind Mr Ramsay to a personal guarantee in respect of the £640,000 pa lease of the York & Albany hotel and restaurant, granted to one of the group companies, without his authority. What’s more, Mr Hutcheson had used a ‘Ghost Writer’ signature machine, normally used for auto penning Christmas cards, fan photographs, menus and other merchandising, to execute the relevant deed in Mr Ramsay’s name.

Decision on the facts

On the facts, Mr Ramsay was unsuccessful. In his judgment of 20 January 2015 Morgan J concluded that the ordinary scope of Mr Hutcheson’s general authority was so wide that it extended to entering into all manner of transactions on behalf of the group companies, and to entering into personal guarantees in Mr Ramsay’s name in respect of those business leases, even where Mr Ramsay was not aware in advance that any such personal guarantee was being given. Mr Hutcheson’s authority even extended to using the Ghost Writer machine to execute all kinds of documents on Mr Ramsay’s behalf.

Legal argument

So aside from the celebrity gossip, with sensational headlines such as ‘Gordon Ramsay’s Courtroom Nightmare’, what interest is Ramsay v Love to property lawyers? Unfortunately, the meaty legal argument was eclipsed by the findings of fact against Mr Ramsay, and was only cursorily dealt with at the very end of the judgment, by way of obiter comment. But Morgan J concluded that all of the legal arguments raised by Mr Love, which would apply in the event that Mr Hutcheson was found not to have acted within the scope of his authority, were unfounded.

Estoppel by negligence

First, if Mr Hutcheson did not have authority to sign the personal guarantee using the Ghost Writer machine, would Mr Ramsay be estopped by his negligence, in entrusting the Ghost Writer to Mr Hutcheson, from denying the validity of the personal guarantee? This was the most interesting legal issue to arise. It has much wider significance beyond the unusual case of Ghost Writer machines: every company entrusting company seals or signature stamps to company secretaries or employees will be concerned to ensure that it will not be bound by the fraudulent acts of such trusted persons.

  • The cases establish that in order for estoppel by negligence to arise, (i) the claimant must owe a duty to the defendant; and (ii) the alleged negligence must be the proximate cause of the loss – or in other words the negligence must be ‘in or immediately connected with the transfer itself’. General negligence as to the way seals or stamps or cheque books are secured and stored, and general negligence in trusting even known fraudsters and giving them unrestricted access to these items, is not sufficient for an estoppel to arise because: (i) such seals and stamps etc could be used for absolutely anything, so it is difficult to identify a class of people to whom a duty of care is owed; and (ii) any negligence is not sufficiently connected with the very transaction in hand for an estoppel to arise.
  • By contrast, estoppel by negligence can operate where a person has negligently drawn up an instrument, such as a cheque, by leaving spaces in it, permitting a fraud to take place (such as in London Joint Stock Bank Limited v Macmillan and Arthur [1918] AC 777 where a £20 cheque was altered to read £120). In that case, the person has taken responsibility for that very instrument, and the negligence is connected with that very instrument.
  • Furthermore, even where a person signs a blank document, entrusting it to a trusted adviser or other party they may well not be negligent (see the comments in Mercantile Credit Co Ltd v Hamlin [1965] 2 QB 242 at 265G, 275D-E and 279D).
  • On the facts, entrusting the Ghost Writer to Mr Hutcheson was not negligent: Mr Ramsay was justified in trusting his father in law in the way that he did at the time. It also seems clear that any negligence was not sufficiently connected with the execution of the personal guarantee itself.

Representation as to due execution

Secondly, if Mr Hutcheson did not have authority to sign the personal guarantee, did he have authority to warrant that it was validly executed when delivering it to Mr Love’s solicitors, so that Mr Ramsay would now be estopped from denying its validity?

  • It is clear that in order for an estoppel to arise there must be (i) a representation as to due execution; and (ii) that representation must somehow have come from the person bound or his authorised agent.
  • In each case it will be important to focus on what representation has in fact been made expressly, or by implication. Ordinarily even a company secretary, when delivering a purportedly executed document, will not be taken to represent that it has been properly executed by other people (see Ruben v Great Fingall Consolidated [1904] 2 KB 712 at 727 and 730-1), although there are cases in which a company secretary, owing to a director’s past practice, has been rested with authority to make such representations on behalf of that director (see Lovett v Carson Country Homes Ltd [2011] BCC 789).
  • In Mr Ramsay’s case, however, it was difficult to see how Mr Ramsay’s father in law would, and would have authority to, make a representation as to due execution in respect of his son in law’s signature on a personal guarantee, particularly where Mr Love and Mr Ramsay had had very little contact, and Mr Ramsay had not indicated to Mr Love that Mr Hutcheson had such authority.

Ratification

Thirdly, if Mr Hutcheson did not have authority to sign the personal guarantee, did the actions of the group company tenant ratify the personal guarantee?

  • The short point here is that actions by the group company, such as paying rent, would not be treated as conduct of Mr Ramsay personally, so as to amount to ratification by him of the personal guarantee (as opposed to any necessary ratification of the lease itself by the company tenant). It did not matter that Mr Ramsay controlled the company.

 

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