Publications
Financial Services Quarterly
Contents:
Download full document
(459KB PDF Document)
To view this document you will need to download a copy of Adobe Acrobat.
Archive:
For earlier editions of Financial Services Quarterly, please click here.
Directors watch out - a signature can bind in both personal and professional capacity
In a recent decision of the High Court1, it was held that an individual who entered into a contract containing a guarantee and signed as a director could be bound in both her professional capacity and in her personal capacity under the guarantee.
An agreement for sale and purchase containing a personal guarantee was signed by the sole director and shareholder of the purchaser.
When payment was sought from the director for default in payment of GST, the director asserted that the agreement was executed in her sole capacity as director of the company and that she was not personally bound by the guarantee.
The High Court determined that the director had signed in a dual capacity, on behalf of the company as its director, and in her personal capacity. She was accordingly bound by the personal guarantee set out in the agreement.
The decision was reached on the basis that there was nothing in the agreement suggesting that the director had not bound herself in both capacities, observing that there was no doubt that she was to be a guarantor and that interpretation of the agreement must be objective.
We consider that the prudent course of action is always to clearly set out the capacity or capacities in which a party is signing an agreement, and to have the parties sign separately for each capacity.
The decision of the Court of Appeal in Trotter, also summarised in this issue of Financial Services Quarterly, reached the opposite outcome.
1 Contributory Mortgagee Nominee Limited v Harris Road No 10 Limited & Anor (2005) 22 NZTC 19,580 (HC)
Enquiries and information
For more information on any of the cases, articles and features in Financial Services Quarterly, please email Rachel Gowing or call on 64 9 916 8825.
Disclaimer
This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.
