Redcard Ltd v Williams (Court of Appeal)

The Court of Appeal considered the construction of section 44(4) of the Companies Act 2006 and whether a document signed by authorised signatories must contain express words stating the signatures were "by or on behalf of" the company in order to be treated as executed by the company. The court held that the words "expressed, in whatever words, to be executed by the company" in s.44(4) add to the signature requirement but do not impose a literal requirement that the document state the words "by or on behalf of" the company. Where a defined term in the document (here "Seller") includes the company and signatures appear under that defined term by two authorised signatories, the document is sufficiently "expressed" to be executed by the company for the purposes of s.44(4). The appeal against Lewison J's decision was dismissed.

Background and parties:

• The dispute concerned a composite contract (including a Supplementary Agreement) for the sale of Redcard Limited's freehold interest in a building and the sale of leasehold interests in individual flats held by certain directors and shareholders. The purchasers were Mr and Mrs Roger Williams (appellants); the sellers included Redcard Limited and the individual leaseholders (respondents).

Nature of the claim and relief sought:

• The purchasers refused to complete and contended that the sellers could not compel completion because the Supplementary Agreement was not validly executed by Redcard. The purchasers sought to avoid the contract on the ground that, in the absence of a common seal, the document did not comply with execution formalities under Companies Act 2006 section 44.

Procedural posture:

• Master Price held (18 November 2009) that the Supplementary Agreement had not been validly executed by Redcard. On appeal Lewison J (23 April 2010) held that the Supplementary Agreement had been validly executed by Redcard under s.44. Permission for a second appeal was initially refused but later granted; the Court of Appeal heard the appeal and delivered judgment on 20 April 2011.

Issues framed by the court:

1. Whether s.44(4)'s phrase "expressed, in whatever words, to be executed by the company" required express words on the face of the document stating that signatures were "by or on behalf of" the company.
2. Whether the fact that the document used a defined term "Seller" (which included Redcard) and contained signatures of two authorised signatories under a box headed "SIGNED...SELLER" was sufficient to satisfy s.44(4).

Court's reasoning and decision:

• The court accepted that s.44(4) adds a requirement beyond mere signatures but rejected the submission that the statute mandates explicit words such as "by or on behalf of". The court reasoned that where a document defines a party by a term (for example "Seller") and the signatures of two authorised signatories appear under that defined term, the document is, by ordinary and sensible interpretation, expressed to be executed by the company.
• The Court of Appeal agreed with Lewison J that the reasonable reader, with the background knowledge available, would understand the signatures under the heading "Seller" to be both personal signatures of individuals and signatures on behalf of Redcard; accordingly s.44(4) was satisfied and the Supplementary Agreement was executed by Redcard.
• The court noted subsections (5) and (6) of s.44 and said they were not necessary to decide this case; no concluded view was expressed on those subsections' application to other factual settings.

Practical observation:

• The court observed that parties should nonetheless take care to state capacities explicitly at execution to avoid expensive litigation over formalities.

Appeal dismissed. The Court of Appeal held that s.44(4) of the Companies Act 2006 does not require express words such as "by or on behalf of" where a document defines a party (here "Seller") to include the company and two authorised signatories have signed under that defined heading; in those circumstances the document is sufficiently "expressed" to be executed by the company under s.44(4). The judge therefore affirmed Lewison J's conclusion that the Supplementary Agreement was executed by Redcard.

The appeal was from the High Court of Justice, Chancery Division (Lewison J) Claim No. HC09C02486. Master Price (18 November 2009) held the Supplementary Agreement was not validly executed by Redcard. On 23 April 2010 Lewison J allowed the sellers' appeal from Master Price and held the agreement was executed by Redcard. Permission for further appeal was initially refused on 29 June 2010 but subsequently granted by the Chancellor on 26 October 2010. The Court of Appeal heard the appeal (16 March 2011) and delivered judgment [2011] EWCA Civ 466 on 20 April 2011 dismissing the appeal.