Celebrity Chef Gordon Ramsay has recently been embroiled in a battle to ascertain if he is personally liable for the rent on a London pub.
The Chef famous for his kitchen nightmare series may have ended up in his own pub nightmare after a the deal took place when Ramsay’s father-in-law, Christopher Hutchison, was working with him to build his restaurant empire.
When structuring a deal to acquire a pub in a limited company name a personal guarantee was granted by Ramsay so that if the company were unable to pay the rent Ramsay would meet this via his own personal assets.
Guarantees are frequently used by landlords in Scotland who rent properties to limited companies. As landlords are often concerned about payment of rent if the company dissolves, they often ask for guarantees from the directors behind the company who would personally have to meet the company’s debts with their own personal assets. Obviously, the benefit of a limited company is the limited liability of the owners of the company, however, a personal guarantee in this way essentially removes this benefit and many directors and shareholders do not feel comfortable granting such documents.
The accusations made by Mr Ramsay are that Mr Hutchison forged Ramsay’s signature on a guarantee document which made Ramsay the personal guarantor for the pub’s rent and that Ramsay should not be bound to honour the guarantee as he did not sign the guarantee. Mr Ramsay alleged that Mr Hutchison used some form of ghost writing machine, which is used by authors to sign books and photographs automatically, to forge Ramsay’s signature on the document.
A lot was resting on the court decision as if the guarantee was valid Ramsay would be liable for £640,000 annual rent for the pub in north London, a sum not even a celebrity chef would be happy to pay out!
The High Court decided that the guarantee was binding because they felt that Mr Hutchison was acting within the wide general authority Ramsay had given him whilst he was working for him.
This is a high profile celebrity case and not many of us will have ghost writing machines able to forge signatures, however, it does highlight the personal risk of entering into a guarantee and the importance of getting professional advice before signing such a document.
If you would like any advice in connection with leasing a property or entering into personal guarantee arrangements, then please do not hesitate to contact me.