Signature of director does not bind in dual capacity as director and shareholder

The Court of Appeal has found that a person is not bound in a dual capacity if he signs an agreement as a director but leaves blank the space provided for him to sign as a shareholder.

In this case, two companies entered a licence agreement that provided for the sole shareholder and director of one of the companies to provide personal guarantees to the other company.

The agreement provided three attestation blocks. The directors of each company signed in one block each. However, the third block (presumably for the shareholders) was not signed.

High Court

The question for the court, in determining whether or not the individuals were bound by the personal guarantees, was whether they had signed the agreement in their dual capacity as both director and shareholder.

The High Court held that one of them, who had initialled each page of the agreement, had signed in a dual capacity as both director and shareholder and therefore was bound under the guarantee.

Court of Appeal

Allowing the appeal, the Court of Appeal1 noted that there was nothing in the agreement suggesting that either director had signed in a dual capacity as both a director and a shareholder. Each director had signed the agreement in the block designated for directors to sign, and it was clear from the face of the document that they had signed in their capacity as directors.

The Court of Appeal went on to say that initialling each page of a document could not convert a signature into anything other than what it was identified to be, which in this case was a signature of a director.

 

1 Trotter v Avonmore Holdings Limited (CA162/04, 1 August 2005 )

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