When is a document a deed?
In the case of Katara Hospitality v Guez and Rose, the court ruled that a document expressed as being a power of attorney was not validly executed as…
In the case of Katara Hospitality v Guez and Rose  EWHC 3063 (Comm), the High Court ruled that a document expressed as being a power of attorney was not validly executed as a deed.
What makes a document a deed?
In order to be valid, a power of attorney needs to be executed as a deed as required by section 1 of the Powers of Attorney Act 1971. What makes a document a deed is laid down by section 1(2) of the Law of Property (Miscellaneous Provisions) Act 1989 (LP(MP)A 1989) which provides that:
“An instrument shall not be a deed unless-
(a) it makes it clear on its face that it is intended to be a deed by the person making it or, as the case may be, by the parties to it (whether by describing itself as a deed or expressing itself to be executed or signed as a deed or otherwise); and
(b) it is validly executed as a deed by that person or, as the case may be, one or more of those parties."
Deeds are required for land transfers, leases, mortgages and charges, sales by a mortgagee, appointments of trustees, releases and variations, and gifts of tangible goods that are not accompanied by delivery. Deeds are generally enforceable even where there is no consideration between the parties. The statutory limitation period for actions brought under a simple contract is six years from the date on which the cause of action accrued. However, in respect of deeds, the limitation period is generally 12 years (subject to certain exceptions).
Analysis and conclusion
In the present case, an individual held a purported power of attorney and acting under it signed an agreement, in a corporate transaction, to pay to the claimants the difference between the purchase price of €68million and amounts received by way of dividends and distributions over the period of eight years from completion.
The purported power of attorney did not contain the word “deed” but did contain the words “power of attorney”, “know all men by these presents”, and “my true and lawful attorney” and had been witnessed. The court had to consider these words and ascertain whether the purported power of attorney was a deed. In doing so the court considered the material part of the Law Commission Report which led to the LP(MP)A 1989 which reads:
“…we recommend that, in addition to our proposals that the formal requirements of the deed should be that the document had been signed, attested and delivered it should also, as a matter of law, be clear on the face of the document that it was intended to be a deed… generally this will be clear because the word “deed” will appear somewhere on the document… such words should be essential; they are recommended in order to give some indication of a general uniform practice which could usefully be adopted. This provision would still leave the court free to decide whether or not a document was intended to be a deed where a different formula was used, but only where there was evidence of such a finding within the document itself.”
In further considering the content of the power of attorney, the court noted the case of HSBC Trust Company (UK) Ltd v Gabriel Quinn  EWHC 1543 (Ch) which also referred to the above passage from the Law Commission Report. In that case the court said that “…whilst it is plain that the use of the word “deed” is not essential, the wording of the [LP(MP)A 1989] does not help to identify what other indications in a document might suffice to persuade the court that it was intended to be a deed. In that case, the court was of the view that “…what is needed is something showing that the parties intended the document to have the extra status of being a deed.”
In the present case, the court was not persuaded that the use of the above words in the power of attorney satisfied the requirements of the LP(MP)A 1989 and therefore the power of attorney was not a deed. The court noted that it was not possible to infer from the above words in the power of attorney an intention that the document should take the form of a deed. The court decided that it instead took effect as an appointment in writing and was not a valid power of attorney.
This case indicates that the courts are likely to struggle to conclude that a document is a deed if it does not expressly state that it is a deed.
Ensuring a deed is valid
It is perhaps appropriate to remind ourselves what will ensure that a deed is valid:
- The document must be in writing;
- The document must specify that it is a deed. Practice dictates that that usually means that the beginning of the document states that it is a deed, as too will the testimonium clause and the execution clause stating that the document is signed as a deed;
- The document must be executed in accordance with the relevant law. For example, for individuals, this is in accordance with the LP(MA) 1989 and for UK companies in accordance with the Companies Act 2006;
- The document must be delivered. This does not mean given to the other party but means an act done so as to evince an intention to be bound. There are certain statutory presumptions of delivery in the Law of Property Act 1982 and the Companies Act 2006 which both provide that a document is presumed delivered upon it being executed, unless a contrary intention is proved.
Michael Budd is an Associate at national law firm Weightmans