An individual who signed as a director was not personally bound

The Court of Appeal 1 has allowed an appeal by an individual who, in the High Court was found personally liable under a guarantee in a sale and purchase agreement, even though she signed that agreement as a director of the principal debtor and not as a guarantor.

The High Court decision was summarised in the Summer 2006 issue of Financial Services Quarterly.

The Court of Appeal did not dispute that it is possible for a person to sign a contract once but in a dual capacity. However, there is a presumption that, if the person signing purports to sign on behalf of a company or other person, he or she is signing only in that capacity. The court decided that it would take clear words or extrinsic evidence to rebut that presumption.

In this case, the Court of Appeal found that:

• the sale and purchase agreement made no reference to the individual as a party;
  
  
• another director of the principal debtor could have signed and the vendor had no reason to expect this particular individual to do so;
  
  
• the guarantee provision could be read as a covenant by the principal debtor to procure a separate guarantee from the individual;
  
  
• the individual had added the word "director" beneath her name when she signed; and
  
  
• there was no evidence of the individual orally agreeing to provide a guarantee.

Consequently, this case was able to be distinguished from other cases where directors have been found to sign in dual capacities (and is more consistent with decisions in other cases where, on similar facts, directors have not been liable).

The Court of Appeal concluded that it was "fairly arguable" that the individual had signed only as a director of the principal debtor and that summary judgment should not have been entered against her. It was recognised, however, that other evidence may emerge at full trial.

 

1 Vuletic v Contributory Mortgage Nominees Limited 17 May 2006, Court of Appeal, CA250/05

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