England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON COUNTY COURT
HIS HONOUR JUDGE DIGHT
CHY08420

		Royal Courts of Justice Strand, London, WC2A 2LL
		30 March 2010

Lord Justice Lloyd:

1. This appeal is about the validity or otherwise of a notice by which the long leasehold tenants of the majority of the flats comprised in a property in West London sought to exercise their statutory right to acquire the freehold of the property. That right is conferred by Chapter 1 of the Leasehold Reform Housing and Urban Development Act 1993 (the 1993 Act). The notice was given under section 13. It must be given by a number of qualifying tenants of flats contained in the premises as at the relevant date which is not less than one half of the total number of flats so contained. In the relevant building, 20/20A Pembridge Villas, London W11, there are seven flats. So the notice had to be given by qualifying tenants of at least four flats. On its face it was. It is common ground that all the requirements of the 1993 Act in respect of the notice, other than the one which is at issue on the appeal, were satisfied.
2. Three of the relevant qualifying tenants were individuals. Each signed the notice. The fourth is Datamust Company Limited (the Company). The relevant page in the schedule to the notice which gives particulars of the participating qualifying tenants is as follows. It sets out the full name of the tenant. It gives the address of the relevant flat and particulars of the lease. Below that there are the words in type "Signed by" and, in the middle of the page, a manuscript signature, which is that of Mr Michael Hickey, and below that also in manuscript the word Director. Mr Hickey said in a witness statement that he was a director and was authorised to sign the notice on behalf of the Company. The question on this appeal is whether his signature amounts to signature of the notice by the Company.
3. Under section 99(5) of the 1993 Act, a distinction is drawn between notices under section 13 (and also section 42, concerned with the acquisition by an individual leaseholder of an extension lease) on the one hand, which have to be signed by the tenant, and other notices on the other hand, which may be signed by or on behalf of the tenant. The subsection is as follows:

"(5) Any notice which is given under Chapter I or II by any tenants or tenant must—

(a) if it is a notice given under section 13 or 42, be signed by each of the tenants, or (as the case may be) by the tenant, by whom it is given; and

(b) in any other case, be signed by or on behalf of each of the tenants, or (as the case may be) by or on behalf of the tenant, by whom it is given."

4. I held in St Ermins Property Company Limited v. Tingay [2002] EWHC Ch 1673 that signature by an agent appointed under a power of attorney did not satisfy the statutory requirement of signature by the tenant. The Court of Appeal in Cascades and Quayside Limited v. Cascades Freehold Limited [2007] EWCA Civ 1555 held that signature by an agent who had been appointed less formally did not suffice. Neither case had to deal with the requirements for signature by a corporate tenant. I alluded to this at paragraph 33 of my judgment but expressly without deciding anything on the point.
5. In City and County Properties Limited v. Plowden Investments Limited [2007] L&TR 15, Judge Reid QC held that a notice signed by one director of a corporate tenant was not sufficient. In the present case Judge Dight held that it was sufficient. We have to resolve that difference of view.
6. No reliance is placed on any provision of the Company's articles of association, which are not in evidence. So the question depends on the general law, as it stood in June 2007 when the notice was given.
7. Before 1989 there seems to have been no statutory provision as to how a company could or should make a document other than a contract or a deed. The Companies Act 1989 made a number of changes to company law, of which the relevant ones, by section 130, were to introduce, among other things, a new version of section 36 and a new section 36A. This was in line with the reform of the law as to the execution of deeds by section 1 of the Law of Property (Miscellaneous Provisions) Act 1989, following recommendations by the Law Commission. Among other things, it became unnecessary for anything by way of a seal, whether of wax, paper, or otherwise, to be used if a document was to be executed as a deed, so long as the intention to create a deed is apparent from the document. At the same time it became unnecessary for a company to have a common seal. It also became unnecessary for authority to execute a deed on behalf of another person, whether real or legal, to be conferred by deed, as had been the case previously.
8. The 1989 amendments stated the position as regards contracts by companies in section 36, which is similar to, though not identical with, the previous law. That had provided that a contract which as between individuals would have to be in writing signed by the parties, might be made on behalf of a company in writing signed by any person acting under its authority, express or implied. This provision derived ultimately from section 37 of the Companies Act 1867, before which a contract by a company had to be under the company's seal. It allowed signature of a contract by a company acting by one authorised person. Section 36 of the 1985 Act, as originally enacted, included this same provision.
9. The 1989 amendments also introduced a new section 36A as regards the execution of documents by companies. This provided two alternatives: affixing the common seal of the company, and signature by two directors of the company, or by a director and the secretary of the company.
10. Section 36A was itself amended, before the time material for present purposes, as a result of further recommendations of the Law Commission in its Final Report on the Execution of Deeds and Documents by or on behalf of Bodies Corporate, Law Comm. 253 (1998). These amendments, which were made eventually in 2005, detached from section 36A the provisions relating to the execution of deeds, and hived these off into a new section 36AA. Sections 36A and 36AA as they stood at the time of the notice in this case were as follows:

"36A(1) Under the law of England and Wales the following provisions have effect with respect to the execution of documents by a company.

(2) A document is executed by a company by the affixing of its common seal.

(3) A company need not have a common seal, however, and the following subsections apply whether it does or not.

(4) A document signed by a director and the secretary of a company, or by two directors of a company, and expressed (in whatever form of words) to be executed by the company has the same effect as if executed under the common seal of the company.

(4A) Where a document is to be signed by a person as a director or the secretary of more than one company, it shall not be taken to be duly signed by that person for the purposes of subsection (4) unless the person signs it separately in each capacity.

....

(6) In favour of a purchaser a document shall be deemed to have been duly executed by a company if it purports to be signed by a director and the secretary of the company, or by two directors of the company ... A "purchaser" means a purchaser in good faith for valuable consideration and includes a lessee, mortgagee or other person who for valuable consideration acquires an interest in property.

(7) This section applies in the case of a document which is, or purports to be, executed by a company in the name or on behalf of another person whether or not that person is also a company.

(8) For the purposes of this section, a document is (or purports to be) signed, in relation to a director or the secretary of a company which is not an individual, if it is (or purports to be) signed by an individual authorised by the director or secretary to sign on its behalf.

36AA(1) A document is validly executed by a company as a deed for the purposes of section 1(2)(b) of the Law of Property (Miscellaneous Provisions) Act 1989, if and only if

(a) it is duly executed by the company, and

(b) it is delivered as a deed.

(2) A document shall be presumed to be delivered for the purposes of subsection (1)(b) upon its being executed, unless a contrary intention is proved."

11. Previously section 36A(5) had covered much of the ground that is now in section 36AA, and section 36A(6) had included text as regards the presumption of delivery.
12. The position now is governed by the Companies Act 2006 section 44, but I need not discuss that as it was not brought into force until 6 April 2008. It would, however, be relevant for notices served since that date.
13. Judge Reid's decision was reached on the basis that the way in which a company registered under the Companies Acts can itself sign a document was regulated by section 36A of the 1985 Act. Judge Dight in the present case disagreed with him, drawing a distinction between executing a document, under section 36A, and signing it, as required by section 99(5) of the 1993 Act. He said "the word execution is reserved for more formal situations and is appropriately used in connection with deeds and other documents of a similar quality. One does not in ordinary English speak of executing a notice."
14. The essence of his reasoning is set out at paragraph 19 of his judgment:

"19. With the greatest respect to the learned judge in the City & County case I have come to the conclusion that Mr van Tonder's submissions on this issue are to be preferred for the following reasons. Section 99 of the 1993 Act requires a participating tenant to sign an initial notice personally. As Peter Gibson LJ held in Cascades and Quaysides Ltd v Cascades Freehold Ltd [2008] L&TR 23, at paragraph 16, "… it is not in dispute that the purpose of section 99(5) in requiring the tenant himself to sign it and not allowing an agent to do so, must have been so that the tenant really knew what he was doing". In other words the focus of section 99(5) is not on the method by which an initial notice is signed but on the person by whom it is signed and, in my judgment, the word "personally" must be construed in that context. A company, being an artificial person, can only act through agents and whether it "signs" a document via a single officer or "executes" a document in accordance with section 36A of the 1985 Act it does so through agents. Thus compliance with section 99(5) has to be via an agent of the company in any event. However, whenever a company acts through the agency of an officer authorised to so act on its behalf the company has, in my judgment, personal knowledge of the transaction in which its officers are acting. In doing so the purpose of section 99(5), as explained by Peter Gibson LJ, will have been fulfilled."

15. As to that, although it is fair to describe section 99(5) as requiring the tenant to sign the notice personally, the word "personally" is not in the Act. It seems to me, with respect, that the judge was sidetracked by that from the statutory question: is this notice one which was signed "by" the company or was it only signed "on behalf of" the company?
16. In relation to a corporate entity which cannot itself hold a pen and apply it to a piece of paper, this may seem a somewhat metaphysical enquiry. But it is one which the law requires to be considered, on occasion, although perhaps only very rarely. This is such an occasion.
17. Despite their researches, neither Counsel before us was able to put forward any case in which a court has had to consider how a company can and does sign a document personally, other than contractual documents which are governed by other legislation as I have mentioned. I speculate that this may be for one or both of at least two reasons. First, a statutory provision which requires personal signature of a document of a kind relevant to a company which is not a contract or a deed is very unusual. Apart from section 99(5)(a), the only such provision cited to us was section 53(1)(b) of the Law of Property Act 1925. If a company is to declare a trust in relation to land, so that this provision applies to it, it is likely that a deed would be used. Secondly, it may be that in former times those acting for or advising companies were likely to use the corporate seal more frequently. If that is used, no problem is likely to arise.
18. In Burman v. Mount Cook Land Limited [2001] EWCA Civ 1712, the Court of Appeal had to consider whether a document complied with the statutory requirements of the 1993 Act as regards a reversioner's counternotice under Chapter 2 concerning the individual right to an extension lease. The document which was said to be the counternotice did not state in terms (as it had to) whether the right to acquire the extension lease was or was not admitted. It had been argued that the right test, influenced by Mannai Investment Co Limited v. Eagle Star Life Assurance Co Limited [1997] AC 749, was whether the reasonable tenant reading the notice could be misled into thinking that the counternotice did not admit the right to acquire the new extended lease. Chadwick LJ at paragraph 26 quoted a passage from the judgment of Rimer J given in the Court of Appeal in Speedwell Estates Limited and Covent Garden Group Limited v. Dalziel [2001] EWCA Civ 1277, as follows:

". . . I consider that the better approach is to look at the particular statutory provisions pursuant to which the notice is given and to identify what its requirements are. Having done so, it should then be possible to arrive at a conclusion as to whether or not the notice served under it adequately complies with those requirements. If anything in the notice contains what appears to be an error on its face, then it may be that there will be scope for the application of the Mannai approach, although this may depend on the particular statutory provisions in question. The key question will always be: is the notice a valid one for the purpose of satisfying the relevant statutory provision."

Chadwick LJ approved that passage as follows:

"In my view, that passage encapsulates, succinctly and accurately, the correct approach."

Later, at paragraph 28, he set out what he considered to be the correct question as follows:

28. I return, therefore, to the question posed by the judge in the present case: "whether a reasonable tenant could be misled into thinking that the landlord's counter-notice did not admit the right to a new lease?" In my view that was not the correct question. The correct question is: "does the counter-notice served by the landlord state that the landlord admits that the tenant had on the relevant date the right to acquire a new lease of his flat?" And, if that question is answered in the affirmative, there is the further question: "does the counter-notice served by the landlord state which (if any) of the proposals contained in the tenant's notice are accepted by the landlord and which (if any) of those proposals are not so accepted?"

19. On that basis, the question for this court is whether the company did sign by the steps that were taken, not what the reversioner might reasonably have thought about it. Likewise, it seems to me unhelpful to spend time considering what may have been the point of the distinction drawn in section 99(5), and whether in the particular case whatever mischief may have been aimed at in fact applied. The point is a technical one, in the present case at least, and the Act is either satisfied or it is not.
20. The question being, therefore, how an artificial person, here a company registered under the Companies Acts, does the act of signing a document, it is necessary to find the answer in either or both of (a) the body's own constitutional documents, which could prescribe what it can do and how it can go about doing it, and (b) the general law on the subject governing all such entities. Since there is no reliance here on the memorandum and articles of the Company, first of all it is unnecessary to consider any question that might arise as to the extent to which any third party, such as the reversioner, is entitled to be concerned with the due compliance with internal formalities, and secondly it is unnecessary to consider what effect those formalities might have if the provision made is different from that of the general law. The only recourse must be to the general law.
21. The rival submissions of Counsel before us reflect the difference of view between Judge Reid and Judge Dight in the two county court decisions that I have mentioned. Mr Heather for the appellant contended that the relevant provision, and the only relevant provision, of the general law is section 36A. This, he argued, applies to the signature of a notice just as it would apply to any other document, apart from a contract which is governed by section 36, and except to the extent that section 36AA adds further requirements in relation to a document to be executed as a deed. To the contrary, Mr van Tonder submitted that section 36A applies only to documents of which one can fairly say that they are executed, and that one does not naturally speak of a simple notice, however important its effect, which requires no more than a signature, as being executed.
22. In the case of an individual, one might or might not use the word "execute" in this context. As it happens, in his witness statement, Mr Hickey, having said at paragraph 3 that the notice "was signed by me on behalf of" the Company and that he was duly authorised to sign, went on at paragraph 4 to say "it is accordingly my belief that the notice of claim has been validly executed by me on behalf of the company and that the execution complies with the requirements in the Act." It may be that Mr Hickey would not have used the word "executed" in ordinary conversation, and Mr van Tonder commented that one should not construe section 36A of the 1985 Act by reference to the words used in a witness statement in 2009. I agree that this is a somewhat forensic point, though it may have some bearing on the use of language even if one is considering the language used by, for example, the professional draftsman of the witness statement, adhered to by the witness himself in signing the document, rather than words which he would have used of his own initiative. I will mention later another context in which the words "execute" is used in this wider sense.
23. An individual may, however, speak of executing a deed, for which there are formalities including the requirement for a witness. Likewise an individual may very well speak of executing a will, which is signed but subject to more demanding formalities including attestation by two witnesses in a particular way.
24. A company may execute a deed, though not of course a will. But section 36A is not only concerned with the execution of deeds. The provisions repealed in 2005, subsection (5) and part of subsection (6), did relate to deeds but these are no longer relevant because they have been taken out and re-enacted in different form in section 36AA. That section does relate to documents executed as deeds. Section 36A as it stands is about the execution of documents generally. Even the fact that a company's common seal is affixed does not by itself make the document a deed.
25. Mr Heather showed us a definition of "execute" in the Shorter Oxford Dictionary. A slightly fuller version to the same effect is in the Oxford English Dictionary itself as follows:

"3. Law. To go through the formalities necessary to the validity of (a legal act, e.g. a bequest, agreement, mortgage, etc.) Hence, to complete and give validity to (the instrument by which such act is affected) by performing what the law requires to be done, as by signing, sealing, etc."

26. If Mr van Tonder's submission is right and section 36A does not apply to the signature of a non-contractual document on the part of a company, then there would be no relevant provision of the Companies Acts that applies to that process. His argument is that there is a distinction between documents of a degree of formality such that one can speak of them being executed by a company, on the one hand, and other less formal documents in relation to which the use of the word execute is unnatural, on the other. It seems to me that this argument poses serious difficulties.
27. This interpretation of section 36A would result in there being four different categories of document made (to use a general word) by a company: contracts governed by section 36, deeds governed by section 36A and section 36AA, other documents "executed" by a company governed by section 36A, and yet other documents made by a company but not "executed" by a company, to which none of these sections would apply. The fourth category would be those documents which it is not natural to describe as being "executed" by a company. Mr van Tonder was not able to put forward a submission as to what documents would fall into the third and the fourth categories respectively, save that he said a notice under section 13, or correspondingly under section 42, of the 1993 Act would be in the fourth category, not governed by section 36A. That reading of the 1985 Act would give rise to a remarkable degree of confusion and uncertainty, as to which documents fall into which category. Moreover there would be no general rule applicable to the fourth category of documents. I can see no proper basis or justification for differentiating between types of document made by a company (other than contracts and deeds) for this purpose and in this way.
28. I would accept the submission of Mr Heather that, at any rate in the context where some degree of formality is required to make a document valid and effective for some particular legal purpose (and the point can only arise in such a context), it is appropriate and natural to speak of the execution of the document, as a matter of ordinary language. That is so even for a document to be made under hand rather than by deed. In particular, it is so for a document which is to be signed by, as distinct from on behalf of, a legal entity such as a limited company. Not only is that, as it seems to me, a natural use of the word "execute" as a matter of English generally, and supported by the OED definition. It also fits well with the context and language of section 36A. Section 36A(8) makes a notable contrast with subsection (4), in providing that where the director or secretary who is to sign, under subsection (4), is itself not an individual, a single signature by an individual authorised by the corporate director or secretary will suffice. For that special purpose a single signature will suffice, which seems to me to confirm that for the purposes of the section generally, a single signature is not enough.
29. The Law Commission, in its Consultation Paper on the Execution of Deeds and Documents by or on behalf of Bodies Corporate, Consultation Paper 143 (1996), reviewed section 36A as it then stood, and did not identify any problem such as Mr van Tonder submitted exists. Although much of the focus of attention of the Consultation Paper was on points concerned with the execution of deeds, it did examine section 36A generally and raised for consultation a variety of issues. Thus at paragraphs 2.2 and 2.3 it said this:

2.2 The law of England and Wales makes an important distinction between instruments which are executed in "solemn form" as deeds, and other instruments which are generally referred to as being in "simple form" under hand. Where the instrument is a contract, this is recognised by the distinction made between a contract executed as a deed, which is a specialty, and an instrument under hand, which is a simple contract.

2.3 An individual may therefore generally execute an instrument such as a contract either in solemn form as a deed, or in simple form under hand. Where the maker is a corporation, the position is a little more complicated. A corporation has a legal status distinct from that of its members, but, not being a natural person, can only act either by resolution of its members in general meeting, or by its directors or other agents. One purpose of the common seal of a corporation has traditionally been to provide a means by which the will of the corporation can be expressed, although in practice authority to affix the seal has long been delegated to the directors. It was formerly the basic rule that all contracts made by a corporation had to be made under the common seal, but this has long ceased to be so."

30. The reference in that passage to execution, even by an individual, in simple form under hand suggests that the point made by Mr van Tonder had escaped the attention of Arden J (as she then was), Mr Stephen Silber QC (as he then was) and their fellow Commissioners. At paragraph 4.7 of the Consultation Paper the point was made that section 36A as it then stood governed the execution of documents generally, not only of deeds. Moreover in Chapter 14 the Consultation Paper asked for views about the provision for execution of documents without affixing a common seal under section 36A(4), including whether to reduce the requirement from two signatories to one: see paragraphs 14.7 to 14.13. In its final report on this subject the Law Commission referred to the responses received on this point and recommended that there should be no change to the requirements of section 36A(4). For that reason no such change was made when the recommendations of the Law Commission were put into effect in 2005.
31. In my judgment, section 36A did prescribe how a company registered under the Companies Acts could itself sign a document which was required for some formal legal purpose. A notice under section 13 or section 42 of the 1993 Act is such a document. I do not rely on the inclusive definition of the document in section 744 of the Companies Act 1985. A notice in writing as required by either section of the 1993 Act is plainly a document, whatever definition of "document" one may use. Therefore I conclude that the notice in the present case, which was signed only by one director and did not have the Company's common seal (if it has one) affixed to it, was not signed by the Company.
32. If it were sufficient for the board to authorise one person to sign on behalf of a company, I can see no reason why it should have to be a director. It could be, for example, the company's solicitor. But the real point is that it was not sufficient for the Company to give authority even to a single director to sign. It had to resolve that it would itself sign the document, and the way in which it could and should have done so was by following the appropriate legal process in accordance with either section 36A(2), affixing its common seal, or alternatively section 36A(4), using the signatures of two directors or a director and the secretary. I therefore agree with Judge Reid in his decision in City and County Properties Limited v. Plowden Investments; in my judgment Judge Dight's decision in the present case was not correct. I would therefore allow the appeal.
33. To hold that the notice was invalid does not mean that the qualifying tenants have lost their chance of exercising the statutory right to acquire the freehold. We were told that a new notice has been served in case the first were to be held invalid. However, we were also told that, in the meantime, there have been other dealings on the part of the reversioner so that whether the first notice is valid or not may make a real difference as regards the possible end result of the exercise of the statutory rights.
34. For the reasons set out above, in my judgment the notice was not valid. It should have been signed by the Company either by the affixing of its common seal or by the signatures of two directors or a director and the secretary. For that reason I would allow this appeal.

Lord Justice Pitchford

35. I agree.

Lord Justice Ward

36. I also agree.