Signed, Sealed, Delivered?

In the recent case of Bibby Financial Services Ltd v Magson [2011] EWHC 2495 (QB), the courts gave a useful reminder of the importance of following strict legal requirements for creating a valid deed.

Facts

Two directors of QCFS were entering into an invoice discounting facility with Bibby Financial Services Ltd (Bibby). The directors met with their relationship manager from Bibby at lunch and a number of documents were produced, including the agreement itself, personal guarantees and separate warranties for each of the directors.

The directors noticed certain errors on the documents and made manuscript amendments to the documents. The directors then signed them only as a gesture of their intent to proceed. When returning them to the relationship manager, they had expected “clean” copies for re-signing and re-dating.

A couple of years passed and QCFS were placed into administration. Bibby demanded repayment of the invoice discounting facility and sought to enforce the personal guarantees and warranties from the two directors.

The directors argued that as they had made handwritten amendments on the documents, they expected clean documents to be produced for them to sign and execute. They argued they could not therefore have intended to be bound by the copies they signed.

Judgment

The High Court held each of the guarantees and warranties signed by the two directors was, in form, a deed. Therefore, they were required to be executed in the manner required by law. In order for a document to be enforceable as a deed it must be signed, witnessed (if necessary) and delivered as a deed. The concept of ‘delivery’ requires the person signing to have indicated he intends to be bound by the deed; simply signing and handing over the document is not enough.

On the facts of the case the High Court found in favour of the directors and held they did not intend these documents to be a deed.

Comment

As this case highlights, although a deed is presumed to have been delivered when it is dated and the deed is delivered when it is executed, this presumption can be removed depending on the facts of the case. It is therefore critical to ensure the parties intend to be bound by the deed and that they demonstrate this intention. This can be done, for example, by including a clause in the deed to clarify when delivery is effective, e.g. ‘This document has been executed as a deed and is delivered and takes effect on the date stated at the beginning of it.’