When is a deed not a deed?

The English courts have continued their slow-burning development of the law around valid execution of deeds in a judgment handed down in the High Court case Lendlease Construction (Europe) Ltd v Aecom Ltd [2023] EWHC 2620 (TCC).

The law of deeds is one particularly close to many a transactional lawyer’s heart, as anyone  who regularly deals with the execution of deeds as part of a deal process will testify.  Over the years a number of cases have produced principles on this subject, with the 2008 Mercury Tax Group case in particular resulting in a tightening of the rules regarding the practice around the execution of deeds via the exchange of signature pages.

The Lendlease case centred around a consultancy agreement, purportedly signed as a deed, regarding a construction project pursuant to which the defendant, Aecom, provided services to a major hospital development in Leeds.  Key to the claimant’s case against Aecom was the ability to bring a claim within the 12-year statutory limitation period for deeds.  Aecom’s contention was that the consultancy agreement had been executed in a manner inconsistent with the law of deeds, and that as such the consultancy agreement should take effect as a contract only, and thus a 6-year limitation period would apply, automatically time-barring the claimant’s claim against Aecom.

The defendant’s contention was based on the following facts:

• Neither of the signatories executing the agreement on behalf of Aecom had signed in the section which stated that the agreement was signed as a deed (but in a separate section above that intended for use where Aecom would execute using its common seal – albeit that no common seal was attached); and
• Neither of the signatories were statutory directors of Aecom at the time they signed.

As such, Aecom claimed, the deed had not been validly executed in accordance with sections 36A and 36AA of the Companies Act 1985 (which was then in force) and section 1 of the Law of Property (Miscellaneous Provisions) Act 1989 and therefore could not take effect as a deed.  The judge's view was that the relevant legal requirement was in s36A Companies Act 1985 which reads at paragraph (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.

The judge, Mr. Justice Eyre, disagreed and ruled that the consultancy agreement should take effect as a deed, notwithstanding the issues raised by the claimant as to its execution.  His key reasons were:

• The Aecom signatories clearly purported to execute the agreement as a deed, and in reality the signatures being placed in the wrong part of the signature page did not imply that they were purporting to execute via the company's common seal.  There was, Eyre J said, “no evidence that the intention was for the common seal to be affixed”. This was no more than a simple error on the part of the Aecom signatories and of itself did not mean that the agreement could not take effect as a deed.
• Aecom appeared to represent that the signatories, while not being statutory directors of the company, had authority to execute contracts and deeds on Aecom's behalf.  Eyre J cited Biggerstaff v Rowlatt's Wharf Ltd  as indicating that a company is bound by the actions of persons who act on behalf of the company with the knowledge of the directors provided they act within the limits of their apparent authority.  This would be the case where the act of a company permitting a person to act in the management of conduct of its business could operate as a representation that such person had authority to act.  Eyre J found that this was the case with Aecom.
• As such there was an artificiality around Aecom's argument that the signatories did not execute the deed validly on the basis they did not have authority to do so.  The judge said: “It is not open to Aecom to accept that it was bound by the actions of  [the signatories] and then to adopt an unrealistic stance as to the nature of those actions or as to their effect”.

Consequently, the claim had been brought within the statutory limitation period for a deed, and was not time-barred.

Key takeaway points for practitioners are:

• The courts may be prepared to accept that a person who is not a statutory director of a company may nonetheless validly execute deeds and contracts on behalf of the company.  This will depend on the particular facts and circumstances in each case - in this case, the judge was satisfied that Aecom permitted the signatories to act in the management and conduct of its business.
• A deed being executed by means of a signature placed in the wrong part of the execution pages does not necessarily prevent the agreement from taking effect as a deed.  Again, this will depend very much on the circumstances.
• To avoid any doubt, ensure that deeds are executed strictly in compliance with the requirements of the Companies Acts.

How can we help?

If you would like to discuss this post, please speak to your usual contact at Burges Salmon or Gregory Nash (a senior associate in the Corporate and M&A team at the firm).