Signature of Missives
Requirements of Writing (Scotland) Act 1995
Who Signs for the Firm? February 1991
Littlejohn v Mackay Revisited
Our aim here is to reconsider the decision in Littlejohn v Mackay 1974 SLT (Sh Ct) 82 in which it was held that only partners could validly subscribe the firm name on a document purporting to be holograph of the firm – in that case, an acceptance of an offer for heritable property. We shall consider first the subscription of such documents by partnerships and then subscription by ‘one-partner’ firms.
Subscription by partnerships
Given the developments which permit the showing of the names of associates and assistants on the notepaper of solicitors’ firms, and given the responsibility which such persons may have, it seems anomalous that they may be able to undertake all kinds of transactions on behalf of the firm, probably unsupervised, and yet cannot sign missives on behalf of the firm, even if authorised to do so.
That was the factual situation in Littlejohn where Hamilton, the manager of a firm of estate agents, had authority from the partners to act on behalf of the firm. By signing the firm name, he purported to accept an offer for the purchase of heritable property on behalf of a client. The court held that, in the absence of previous authority on the point, the practice which had always been followed – that only partners signed the firm name – should be maintained. Sheriff Peterson and, on appeal, Sheriff Principal A G Walker admitted that there did not appear to be any direct authority in point and so the decision had to be reached by looking at related cases, in the words of Sheriff Peterson “peripheral”.
The Partnership Act 1890 clearly provides that every partner is an agent of the firm for carrying on in the usual way business of the kind carried on by the firm (s 5). The Act goes on to provide in s 6 that
“an act or instrument relating to the business of the firm done or executed in the firm name, or in any other manner showing an intention to bind the firm, by any person thereto authorised, whether a partner or not, is binding on the firm and all the partners”.
That might be game, set and match but for two matters: (a) the interpretation of the phrase “showing an intention to bind the firm’ and (b) the meaning of the proviso.
At first instance in Littlejohn, the Sheriff (Peterson) was of the opinion that the first part of s 6 applies only where the person authorised to sign is binding the firm as a principal and has no application where the firm is itself an agent. It is submitted, with respect, that that interpretation is not warranted. It is clear form the section that if an or instrument is done or executed in the firm name by an authorised person, that will bind the firm. The words “or in any other manner showing an intention to bind the firm” envisage a situation where the person signs “pp” the firm, or signs his own name, but indicates that he is a partner or is otherwise authorised to sign on behalf of the firm. It also cover the situation where the firm name is descriptive where, according to Clark (Partnership, p 243), it might not be enough for a partner to sign the firm name, without also adding his own signature. In our view, s 6 is no more than a corollary to s 5 which deals with the authority of partners. Section 6 adds to that by dealing with the authority of non-partners and also the use of the firm name.
To take the common example of a person who instructs a partner in a firm of solicitors to purchase a house, and the partner wishes some, or all, of the work to be carried out by an assistant, it is obvious that the client’s express or implied consent must be obtained. However, whether or not the assistant can sign the firm name is a matter for the firm and not for the client.
The second issue mentioned above is the meaning of the proviso to s 6: “Providing that this section shall not affect any general rule of law relating to the execution of deeds or negotiable instruments.” In other words, if despite the general authority contained in s 6 a special rule obtains in relation to the execution of deeds by a partnership, that rule applies. The same applies to negotiable instruments.
So far as the execution of documents on behalf of a partnership is concerned, the court was not referred to any direct authority except obiter remarks by Lord Justice-Clerk Patton and Lord Cowan in Beveridge v Beveridge (1869) 7 M 1034. The Lord Justice-Clerk said:
“Ample as the appointment [as the manager] is, an exceptional as being introduced into the contract of co-partnery, assuredly I think that it cannot warrant a party, who is a manager only, to sign the obligations of the company in the name of the company firm” (p 1039).
Lord Cowan’s comment was similar:
“The first leading question is whether Mr Robert Beveridge, who is appointed manager of this concern, is entitled to subscribe the company firm to obligations of the partners. He is not a partner. If he had been a partner, he would have been entitled to so do, but his not a partner” (p 1045).
Other cases such as Scottish Lands & Buildings Co Ltd v Shaw (1880) 7 R 756; Caithness Flagstone Quarrying Co v Sinclair (1880) 7 R 1117; and Brown’s trs V McDonald 1922 SLT 7 which were referred to in Littlejohn were not in point. In Scottish Lands, one brother had signed another brother’s signature on an offer because that brother had an injured hand and was unable to write. It was held that this was not holograph of the other brother. In Littlejohn, at first instance, after referring to this case, Sheriff Peterson said:
“It would seem a reasonable inference from this that where this is an incorporeal legal person in the form of a firm such writing should be in the hand of one of the partners” (p 83).
It is submitted, with respect, that this does not follow. In Scottish Lands, the offer was signed by x when it should have been signed by Y, and there was nothing in the correspondence to indicate that x was signing as an agent. In the usual case, the offer made by a firm of solicitors will indicate that it is on behalf of a client. The issue then becomes “Who can sign on behalf of the firm?” and Scottish Lands does not provide the answer. The case illustrates the point that even where A signs B’s name with B’s authority, that is not holograph of either A or B. In Caithness Flagstone Quarrying co there was a lease, but it was intended that there should be an addition to it. The purported addition as dictated by the landlord to his factor in the presence of the tenant and it was handed to the tenant. It was, however, unsigned and although the tenant later gave an acceptance, it was held that there was no contract because the acceptance was unsigned. Lord President Inglis did say, however, that had the factor signed in his own name as agent, that would have been binding on the principal “provided there is no doubt about his authority” (p 1120; see also Lord Deas, p 1121, Lord Shand, p 1121). In Brown’s Trs a similar decision was reached where a son signed his name on behalf of his mother using the phrase “adopted as holograph for Ann McDonald”.
Although the proviso to s 6 seems to indicate that there may be a special rule which requires that partners and only partners can sign the firm name on behalf of the firm, no authority was cited in support of the rule except the above-quoted observations in Beveridge. Lindley on Partnership, the standard work, is silent on the point and there is nothing in the Scottish books, such as Clark and Miller. Works on conveyancing do not throw any light on the matter either. The Subscription of Deeds act 1579 requires writs of “great importance” to be signed by “principals”, and, whatever that may mean, it is beside the point since the authentication statutes do not apply to privileged writings such as those which are adopted as holograph.
Having reviewed the various authorities which were cited in Littlejohn, Sheriff Principal Walker said:
“In the absence of principle, what is important is that there should be a well recognised rule which is uniformly and rigidly adhered to. In these circumstances, even if the continued application of existing practice may, in particular cases, appear to conflict with common sense, it is in the interests of all concerned, including future litigants, that the established practice should continue to be followed” (p 86).
The Sheriff Principal may be correct about maintaining established practice, but before we assume that he is, it is necessary to consider the advantages on the one hand of permitting only partners to sin the firm name and on the other hand of allowing authorised persons other than partners to act on behalf of the firm in any matter by using the firm name. The starting-point must be s 5 of the Partnership Act which provides that every partner is an agent of the firm and that he will bind the firm if he does something which is in the firm’s line of business. That is implied authority. He will not bind the firm if he has no authority and the person with whom he transacts knows that, or did not think that he was a partner. Therefore, in the case of a firm of solicitors which makes an offer on behalf of a client for the purchase of heritable property, the partner’s signature, or the signing by him of the firm’s name, will bind the firm. That will be so even if there is some limitation on his authority – for example, he can offer only where the purchase price is under £5000,000. The person to whom the offer is addressed would be entitled to proceed on the basis of the implied authority, unless he knew of the limitation on the partner’s authority. If the firm had imposed such a limitation, it would be for the firm to draw that to the attention of persons to whom offers might be directed (see also s 8). If they failed to do so, on the firm’s head be it.
Anyone other than a partner would not initially at least have any implied authority. Section 6 provides that any act done by such a person ill bind the firm, only if he was “thereto authorised”. In other words, anyone dealing with a non-partner is entitled to be satisfied that the person has authority to act on behalf of the firm. Any formally executed document or missives which were signed by such a person would not be binding on the firm if it was obvious ex facie of the document that the person was not a partner. If the firm wished to avoid being asked for such authority or having such documents challenged, it could take steps to advise those with whom the non-partner would be likely to transact. If, however, someone has a course of dealing with the non-partner, it would be possible for him to rely on ostensible authority. If that analysis is correct, it is difficult to see what mischief Sheriff Principal Walker seemed anxious to avoid by insisting on adherence to an established practice.
Let us assume that some brave soul successfully challenged the decision in Littlejohn v Mackay and associates and assistants began making offers for heritable property. The first time that anyone received such an offer, assuming they could identify it as having been signed by someone who was not a partner, the offeree would be entitled to be satisfied that the person had the necessary authority. If the person had the necessary authority – fine; if not, “Away and get your offer signed by a partner [sunshine].” If the firm wished to avoid such challenges, it would take steps to ensure that the non-partner’s authority was evident to those with whom he might transact. If after a series of dealings the persons transacting could rely on the non-partner’s apparent authority, wherein lies the difference between that and the position of a partner?
Subscription by ‘one-partner’ firms
Littlejohn was concerned with the question of authority within a partnership. Even if the decision is correct, it is submitted that it has no bearing where the ‘firm’ is operated by a sole trader. There is nothing in the Partnership Act, or so far as we can see, anywhere else, which would prevent such a person from giving an associate, or assistant, or even a trainee, power to sign missives on behalf of the ‘firm’, in the ‘firm name’. It has to be borne in mind that this is not a ‘firm’ within the meaning of the 1890 Act, but an individual trading under a business name. Strictly speaking, on the basis of the decision in Scottish Lands, it is not competent for an individual who trades in this way to sign the business name rather than his own, but it is accepted practice, certainly among solicitors, not only to do this but to accept documents such as missives which are signed in this way.
Summary
To summarise, it may be argued that documents which require to be executed in a particular way, such as missives, are so important that they require to be signed only by a partner. That is certainly the practice, probably a universal one. In many cases, the partner may be the most experienced person, but there does not seem to be any good reason for denying authority to a qualified assistant, let us say of fifteen years’ standing, who will take the transaction on, and for requiring that the missives be signed by a partner of twenty-four who was assumed yesterday! (One suspects that the client may repose greater trust in the grey-haired qualified assistant than in the youthful-looking twenty-four-year-old.) As we have said, we cannot find any authority, other than Littlejohn, for that proposition and, in our opinion, Littlejohn is of doubtful authority. However, even if it is correctly decided, it has no application to sole traders who are not prevented from delegating authority to others to use the ‘firm’ name. One would hope that whether the ‘firm’ is a partnership or not, such authority would not be given to anyone other than a qualified solicitor. We cannot find authority which denies such a person the right to use the firm name, but clearly in the case of a partnership, or a sole trader, anyone transacting with such a person would be entitled to be satisfied about his or her authority.
Douglas J Cusine
Judith Pearson
University of Aberdeen
