InsightsInsight - Commercial Property - POSTED: November 28 2023
Imperfect execution of deeds by companies
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Where a deed is to be executed by a director and witness or by two directors, if one or both (where two directors are to sign) of the persons executing as a “director” is not registered as a director at Companies House, is the deed invalid or perhaps enforceable only as a contract under hand?
The answer may depend on what was intended, according to the recent High Court case of Lendlease Construction (Europe) Ltd v Aecom Ltd  EWHC 2620 (TCC).
If the document does take effect as a deed, it is likely (subject to the terms of the deed) that it can be sued on for 12 years from the date of a breach instead of the six-year period that (in the absence of wording otherwise in the document) applies to a mere contract under hand.
Lendlease, as main contractor, appointed Aecom as building services consultant in September 2004 in relation to works to a hospital. Lendlease were held liable to the developer by the High Court for losses caused by works not being in accordance with the building contract. Lendlease looked to recover some or all of its liability from Aecom. To do so, it needed to show that it was in time to commence its action against Aecom. Less than the 12 years allowed by a deed would certainly mean they were out of time.
The appointment was expressed to be a deed. The block the two Aecom persons signed required the company seal to be affixed, witnessed by two directors. Neither of them was registered as a company director at Companies House and the company seal was not affixed to the document.
The Court quickly concluded that the two persons had signed against the company seal execution block by mistake. There was no evidence of an intention to use the company seal. That they had signed in the wrong place should be ignored. There was an execution block for signature by two directors without the use of the company seal, which they must have missed.
That still left the fact that they were not statutory directors registered as such at Companies House. As the judge put it: “The question, therefore, becomes one of the effect of a document which has been signed by two persons purporting to execute it as the deed of a company by reason of signing as directors in circumstances where those persons were not directors but where the company was content that they were authorised to enter the agreement on its behalf.”
The judge discussed the case law and concluded (at paragraph 111 of the judgment) that when the directors: “…signed the Consultancy Agreement they were intending to execute a deed on behalf of Aecom. They were not acting improperly in relation to Aecom in doing so but were indeed doing what they were expected to do. As I have already noted the necessary representation and reliance can readily be inferred here. In those circumstances it is not open to Aecom to contend that the Consultancy Agreement was not a deed. It follows that the applicable limitation period in respect of claims asserting a breach of that agreement is one of twelve years from the date of the accrual of cause of action.”
As a construction lawyer, I have to consider sometimes very large numbers of appointments, subcontracts and collateral warranties and try to establish that they were executed by persons who are registered at Companies House as directors (or are otherwise able to bind their company, for example by a power of attorney). Sometimes they are not and, if it is not too late, the sensible thing will still usually be to get the document re-executed as a deed by the correct persons. However, at least this judgment (assuming it is not appealed and not overturned on appeal) should provide some room for argument where people who purport to execute as directors turn out not to have been registered as such at Companies House but were held out by their company as having the necessary authority to bind the company.
In this case, Lendlease’ claim against Aecom was, anyway, held to be out of time, once the judge had decided on the last date that Aecom gave relevant advice. The judge also went on to discuss the merits of each claim, in case his decision that any claim was out of time, proved to be wrong.
This content is correct at time of publication
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