Lovett & Anor v Carson Country Homes Ltd & Ors

A forged signature does not make a corporate document incapable of having legal effect for every purpose. Although a forgery lacks actual authority, a company may be bound where an officer has ostensible authority to represent that the company’s execution formalities have been complied with. The question is whether the third party acquired an interest in property in good faith for valuable consideration and whether the company clothed the officer with the relevant apparent authority. Forbearance may constitute valuable consideration where an implied request for forbearance can be inferred. On the facts, the bank was a purchaser within section 44(5) of the Companies Act 2006, and the company secretary had ostensible authority to warrant the authenticity of the documents.

The applicants were appointed as administrators of Carson Country Homes Ltd under a debenture granted to Barclays Bank plc. One director alleged that his signatures on the debenture, guarantee and board minute had been forged by the other director. The application therefore concerned the validity of the debenture and the administrators’ appointment.

The court found that the signatures were not genuine and that the signing director lacked actual authority. The central issues were whether section 44 of the Companies Act 2006 validated the debenture in favour of the bank, whether the signing director had ostensible authority, and whether estoppel or acquiescence prevented the challenge.

1. Validity of appointment. The appointment of the administrators under the debenture was valid.
2. The purported signature of the director was forged, and the signing director had no actual authority, express or implied, to execute the guarantee or debenture using it. The other director had accepted the signing of routine documents in his name where he knew of the underlying transaction, but had not authorised this guarantee and debenture.
3. Under section 44(5) of the Companies Act 2006, the bank was a purchaser. It acquired an interest in property, acted in good faith, and had given valuable consideration. The company’s request for the bank to refrain from enforcement could be inferred from the commercial circumstances, so forbearance constituted consideration.
4. The word “purports” focuses on the impression conveyed by the document. A document may therefore purport to be signed by two authorised signatories even though one signature is forged.
5. A forgery is a nullity in the sense that no one has actual authority to issue it. That does not prevent it from having legal effect where general principles of ostensible authority or estoppel apply. The company had clothed the signing director with ostensible authority because he alone conducted its banking and documentation, with the knowledge and consent of the other director, and had repeatedly submitted documents bearing the other director’s purported signature.
6. The court did not decide whether section 44(5), without actual or ostensible authority, independently validates a forgery. Any conclusion on that issue would have been obiter.
7. The alternative estoppel and acquiescence arguments would have failed. The bank had not proved reliance and detriment, and the other director had sought sight of the debenture before the appointment was made.