Authority COPY Flashcards
First Energy (U.K.) Ltd. v. Hungarian International Bank Ltd. [1993]
C of A
Plaintiffs had been in negotiation with a branch manager of bank for a business loan - manager had made it clear that he did not have authority to grant the loan – would have to be approved by people higher up in the management hierarchy.
Later on, he (wrongly) informed plaintiffs that authority had been given.
Q: was bank liable?
C of A held; YES
Notwithstanding the fact that the bank knew that the manager didn’t have authority to grant the loan, the manager still has ostensible authority to say that the loan had been granted.
Can be thought of (as suggested by some) as case in which ‘the bank manager was held out as having authority to communicate to the customer decisions of the head office’
Difficult to reconcile with British Bank of the Middle East v. Sun Life Assurance Co. of Canada (UK) Ltd.
Academics tend to prefer this case.
Midland Bank v Seymour [1955]
Ireland v Livingston applied in more modern context of instructions given to a banker who paid a letter of credit.
DEVLIN J:
“The true view of the matter…is that when an agent acts upon ambiguous instructions he is not in default if he can show that he adopted what is a reasonable meaning”.
European Asian Bank AG v Punjab & Sind Bank (No. 2) [1983]
ROBERT GOFF LJ emphasised that some limit must be put on the principle in Ireland v Livingston.
Thus, the agent who seeks to rely on his own interpretation of an instruction by the principal must have acted reasonably in all the circumstances in so doing.
This may impose on the agent a duty to seek clarification of ambiguous instructions, where possible, where the agent ought obviously to have realised that the instructions were ambiguous.
What is Authority?
Authority creates a power in the agent to bind the principal in relation to contracts and other transactions.
Kelly v. Fraser [2012]
JCPC
Employee - member of its pension scheme - changed jobs - the HR Executive in charge of pensions at new employer permitted him to transfer the benefits accrued with old emplyer into new employer’s pension fund.
When fund wound up, its trustees argued that Executive who permitted all this had no authority to do so (this was conceded)
But JCPC HELD; executive did have ostensible authority to do so, and trustees were bound.
Reasoning: the company organised its affaris in such a way that made it look that the Executive who was in charge of employee benefits and communicating decisions in relation to it had the necessary authority to do so.
Found authority Armagas v Mundogas (The Ocean Frost) and First Energy.
Also considered RELIANCE
JCPC said, as a general rule, there must be some degree of reliance, but the reliance might take the form of the third party losing an opportunity to take some alternative course of action. (E.G. here, employee might otherwise have invested his pension benefits from former employer elsewhere).
Kooragang Investments Pty. Ltd. v. Richardson & Wrench Ltd. [1982]
Not technically an agency case – really about Hedley Byrne liability – but applies.
A valuer employed by a firm of chartered surveyors wrote on the firm’s official stationery a fraudulent valuation of a piece of land - plaintiff relied on it and lost money.
Valuer had no authority from frim to to make this valuation - only connection to firm was its offical stationary.
Q: was the fact it had been written on the firm’s official stationary enough to make it liable as principal?
JCPC Held; NO
Merely allowing this employee access to the official stationery did not amount to a representation that anyone using it was authorised to do so.
Armagas v. Mundogas S.A., ‘The Ocean Frost’ [1986]
H of L
Charterparty - agents for ship owner and agents for charterer concocted a fraud; told shipowner that ship had been chartered for two years; told the charterer that the ship had been chartered for one year - hoping to capitalise on rise in charter rates - but they actually fell.
Q: were the charterers were bound by the two year charterparty?
Accepted that charterer’s agent had ostensible authority to enter a two year charterparty.
H of L held; the charterers were NOT bound by the two year charterparty because the owner’s agent, being in cahoots with the charterer’s agent, knew that charterer’s agent lacked actual authority to enter into a two year charterparty and that it would be impossible for him to obtain such authority.
Actual knowledge of agent’s authority will override ostensible authority they will otherwise have.
Thus, apparent authority cannot arise if the third party is aware that agent’s authority is limited so as to exclude his entering into transactions of the type in question
Freeman & Lockyer v. Buckhurst Park Properties (Mangal) Ltd.
(On actual authority)
Case is on ostensibel authority, but DIPLOCK LJ provided useful description of how ACTUAL AUTHORITY is to be approached:
“An ‘actual’ authority is a legal relationship between principal and agent created by a consensual agreement to which they alone are parties. Its scope is to be ascertained by applying ORDINARY PRINCIPLES OF CONSTRUCTION OF CONTRACTS…to this agreement, the third party is a stranger; he may be totally ignorant of the existence of any authority on the part of an agent”
- So authority given orally, its terms may involve contested evidence and, incidentally, difficulty of proof.
- If the agency has been set out in writing, the relevant documents will need to be construed in the ordinary manner.
- If agent vested with authority by deed, the stricter rules on interpretations of deeds shall apply – within the ‘four corners of the instrument’.
Where express authority must be given in writing:
Powers of Attorney Act 1971, s.1 - Powers of Attorney must be in writing (by seal)
Mental Capacity Act 2005, s. 9 - Lasting Power of Attorney must be in writing AND in a set form.
Generally, the authority of the agent need not actually be in writing just because the contract that they are entering into with the third party does need to be (Heard v Pilley).
Bailey v. Angove’s Pty Ltd. [2016]
Can authority ever be IRREVOCABLE?
Australian company (principal) sold wine on UK market through UK company acting sometimes as its agent and sometimes as a principal in its own right.
UK company went insolvent, so Australian company termianted the agency.
Q: Who was entitled to sue third parties for money owed to UK company under the agency arrangements?
Principal and UK company’s liquidator fought over this right.
UKSC held; the agency contract, having been terminated, the agents had no continuing power to sue for sums due under contracts with third parties made on principal’s behalf - only principal could sue.
Said that authority was revocable because agency contract explicitly said that it was revocable if the agent became insolvent.
But - LORD SUMPTION, obiter, an agency contract can be irrevocable if it’s an ‘AGENCY COUPLED WITH AN INTEREST’ – i.e. an agency set up in order to give the agent some specific power to do something for the agent’s own benefit.
gave examples of cases about agents being empowered to enforce securities for their own benefit, which they wouldn’t otherwise have a power to do.
This is a very a narrow exception to the general rule that authority is generally revocable by the principal - SUMPTION - can be revoked even if the revocation is a breach of contract ; just exposes the principal to a claim for damages.
Thanakhorn Kasihorn Thai Chamcat v. Akai Holdings Ltd. (in Liquidation) (2010)
Lord Neuberger, in Hong Kong Final Court of Appeal considered the issue or RELIANCE by the third party, in the context of finding ostensible authority.
The third party MUST have relied on the representation that the agent has authority (Kelly v Fraser), although relatively weak evidence of reliance seems to acceptable.
But said that there might be some exception to this: if the third party’s reliance is ‘dishonest or irrational (which includes turning a blind eye and being reckless)’.
I.E. That their belief in the principal’s representation that the agent had authority was irrational.
Waugh v. H.B. Clifford & Sons Ltd. [1982]
Ongoing litigation - settlement agreement had been reached - last minute, one of the parties changed his mind, but his solicitor had already signed off on it, as news of the change of heart did not reach him - he sent letter using firm’s commercial starionery agreeing to the settlement on behalf of the client.
Held; client WAS by this.
Because solicitor was an employee of the firm who had been involved in the issue, and was using the firm’s note paper, all the conditions for ostensible authority had been met (distinguishable from Kooragang Investments Pty. Ltd. v. Richardson & Wrench Ltd. )
Freeman & Lockyer v. Buckhurst Park Properties (Mangal) Ltd. [1964]
Seminal case on OSTENSIBLE AUTHORITY:
Director of company, acting as its agent, entered into contract with architects for development of a housing estate.
He acted as a de-facto MD but had no express actual authority to enter into this contract as had not been formally appointed as an MD under the articles.
Q: was the company bound on the contract?
C of A held; YES
Although director had never been formally appointed as a MD and therefore lacked the express actual authority from the company to make the contract, he appeared to have such authority by reason of the position that he was in respect of the company’s management - had ostensible (apparent) authority,
DIPLOCK LJ explained the company’s liability by reference to estoppel.
Spiro v. Lintern [1973]
Another way PRINCIPAL may REPRESENT that agent has authority is through his inertia - lack of action - ommitting to correct a false impression by denying his purported agent’s appearance of authority.
Here, man separating from wife - left wife to arrange with estate agents to sell their house but she had no authority to authorise sale of it - agreed sale to third party - He neither accepted nor denied his wife’s authority to sell, but permitted the prospective purchaser’s gardener and builder to work on the house; gave her PoA to complete sale when he went away.
She then decided to sell it to someone else.
C of A held; the third party was under a mistake belief that the husband was under an oblgiation to sell the house to him, BUT he was under a duty to disclose that his wife had acted without his authority - otherwise, it was a representation by conduct.
BUCKLEY LJ:
“If A sees B acting in the mistaken belief that A is under some binding obligation to him and in a manner consistent only with the existence of such an obligation, which would be to B’s disadvantage if A were thereafter to deny the obligation, A is under a duty to B to disclose the non-existence of the supposed obligation”.
Farquharson v. King [1902]
Agent was employed as a clerk by dealers in timber - he devised fraudulent scheme -using an assumed name, sold some of their timber to third parties and then, using his real name, told the warehouse owners to deliver timber to the third parties (i.e. so he would make the profit, not his employer).
When company found out, sued him for conversion of ther timber (all in breach of actual authority).
H of L; held YES - he did NOT HAVE OSTENSIBLE AUTHORITY to do this.
Just because he had constructive possession of the plaintiff’s goods, did not give him ostensible authority to sell them.
Merely giving someone possession of your chattels or your movable property, does NOT give you any power of sale.
Thus, a restriction on agent’s authority not known.
