Property in dispute - November 2011

Welcome to this month’s property litigation emailer.  As a tease for what is to to come below, can you tell me what this Latin phrase “non est factum” means?

I am also going to remind you of the availability of enforcing county court judgments which you may have against a limited company at a home address.

Non est factum

The term non est factum is derived from the Latin “not his document”.  Non est factum is a claim that a party signing a document was unaware of its true nature and thus ought not to be bound to it in contract law.  The misunderstanding must relate to the fundamental nature of the document.  Why is this relevant?  Well, the High Court have recently applied this doctorine in a case concerning the guarantor of a commercial lease.

In the case of Trustees of Beardsley Theobalds Retirement Benefit Scheme -v- Yardley [2011] the High Court held that a landlord’s constructive knowledge of undue influence made a lease guarantee unenforceable.  A guarantee from a company employee was given as a result of undue influence and therefore unenforceable.  The employee had signed a lease as guarantor, at the request of one of the company’s directors, without having been advised about the nature of the document or offered the opportunity to take independent legal advice. 

For the defence to succeed, the employee needed to show that the landlord had constructive knowledge of this undue influence.  As the landlord knew the financial position of the tenant’s company was precarious, it was put on notice of the need to satisfy itself about the employee’s willingness to provide the guarantee.  The landlord should have asked a guarantor to provide written acknowledgement of his agreement to stand as guarantor, along with confirmation that he had been aware of the risks associated with providing the guarantee.

The High Court also held that the employee had successfully established a defence of non est factum, as he was unaware of the true nature of the document.  The court found that it was usual practice for the employee to be asked to witness documents and the director took advantage of this to mislead the employee into believing that on this occasion he was simply witnessing another signature.  The employee was induced to sign the lease without raising enquiries as to what he was signing as a result of the deliberate misrepresentations, by conduct and word, of the director. 

Enforcing against a limited company at a home address

With many people now running limited companies from their home, it is becoming more commonplace for me to advise on enforcing county court judgments against a limited company at a home address.

Some debtors, believe that High Court enforcement orders against a limited liability company cannot be executed at a home address.  This is certainly not the case, as enforcement can and regularly does take place under these circumstances, often with high success.

Usually assets belonging to the company will be found at the address and are available for seizure by a High Court enforcement officer.  These may include home office equipment (computers and printers etc), tools and machinery and company vehicles.  Further, the limited company cannot claim these goods or exempt from seizure by being “tools of the trade” aiding enforcement. 

If goods of the debtor are in a building not attached to the residence then the enforcement offer may force entry (usually using a locksmith) if instructed to do so.

In most cases, the threat of removal and potential disruption to the business encourages the debtor to make payment, even though in reality the goods seized may not be of a high enough value at auction to clear the debt in full.