## Facts

- Victor Gray controlled two companies, Graylaw Holdings Ltd. (Graylaw) and Link Service Stations Ltd. (Link), and arranged for them to borrow about £5 million from TCB Ltd.
- A 22 January 1982 confirmation letter from TCB (read to Gray) provided that Gray would give a personal guarantee supporting the loan.
- Because completion was urgent and Gray was due to travel to Switzerland, Gray signed a power of attorney appointing his solicitor, Rowan, to sign documents on his behalf.
- The power of attorney was expressed in deed form and recited that it was “signed, sealed and delivered,” but no physical seal was affixed.
- Some of the collateral to be provided for the loan was registered in the names of third parties (mortgagees/registered holders). TCB required those third parties to sign guarantees.
- TCB used its standard form guarantee for those third parties and added a notation limiting each third party’s liability to the value of the pledged stock.
- Gray mistakenly signed a guarantee that also contained the limiting notation, even though the agreed bargain was for Gray to give an unlimited guarantee.
- When the mistake was discovered on 26 January, Rowan agreed it was an error and stated he could correct it under the power of attorney; he said he wanted to confirm matters with Gray.
- Rowan made a telephone call, said to be to Gray at Gray’s London apartment, and then executed a revised guarantee that removed the limitation and made Gray’s liability unlimited.
- Graylaw and Link later defaulted. TCB sued Gray on the revised guarantee.
- Gray defended on the basis that (a) the power of attorney was invalid as a deed because it lacked a seal and therefore Rowan had no authority to execute the revised guarantee, (b) Rowan could not have received Gray’s approval by telephone because Gray had already left for Switzerland, and (c) Link’s debenture securing the borrowing was invalid because Link’s articles required execution by a director and Gray could not delegate that function to Rowan (who was not a director).

## Issues

1. Whether Gray could deny the validity of the power of attorney (for want of a seal) against TCB so as to defeat Rowan’s execution of the revised, unlimited guarantee.
2. Whether, given the deed-like form and TCB’s reliance, Gray was estopped from asserting that the power of attorney was not duly sealed/executed.
3. Whether Link’s debenture was unenforceable because it was not executed in the manner required by Link’s articles, and whether section 9(1) of the European Communities Act 1972 treated it as regularly executed in favor of TCB.

## Decision

- The court held that Gray was estopped, as against TCB, from denying that the power of attorney was duly sealed and effective as a deed, given that he signed a document that on its face asserted sealing and delivery and was presented as such to TCB.
- As a result, Rowan’s execution of the revised guarantee under the power of attorney was effective against Gray, and the revised (unlimited) guarantee bound Gray.
- The court rejected the attack on the Link debenture based on noncompliance with internal execution requirements in Link’s articles, holding that section 9(1) of the European Communities Act 1972 deemed the debenture to have been regularly executed in favor of a person dealing with the company in good faith.
- Judgment was for TCB; Gray’s attempt to avoid liability on the revised guarantee and to invalidate the debenture failed.

## Legal Principles

- A person who signs a power of attorney in a form that represents it to be a deed (including an execution clause stating “signed, sealed and delivered”) may be estopped from denying due sealing/execution as against a counterparty who relied on the representation without notice of the defect.
- Where that estoppel applies, acts done by the attorney under the power (including execution of a corrected instrument intended to reflect the parties’ agreement) are effective against the principal in dealings with the relying counterparty.
- Section 9(1) of the European Communities Act 1972 can protect third parties dealing with a company by treating certain company instruments as regularly executed despite internal irregularities (such as failure to comply with execution requirements in the company’s articles).

## Conclusion

TCB Ltd. v. Gray held that Gray could not escape an amended, unlimited personal guarantee by pointing to the missing seal on a deed-form power of attorney he signed and presented as sealed; he was estopped from denying its validity against TCB, so Rowan’s revised guarantee bound him. The court also upheld Link’s debenture notwithstanding noncompliance with Link’s articles, because European Communities Act 1972 section 9(1) treated the debenture as regularly executed in favor of TCB.


TCB Ltd. v. Gray, [1986] 3 CMLR 439 (1985)