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Charles Samek KC comments on the law of principal and agent following the Supreme Court’s ruling in The Law Debenture Trust Corporation plc V Ukraine [2023] UKSC 11 (15.3.23)

16.03.23

In The Law Debenture Trust Corporation plc v Ukraine [2023] UKSC 11 (15.3.23), the UK Supreme Court has, in a welcome clarification of the law of principal and agent, finally consigned the confusing concept of “usual authority” to the dustbin of legal irrelevance: https://lnkd.in/egWEmsXS

I would distill the principles as follows:

1. The authority of an agent (A) to act for the principal (P) may be either actual or apparent.
2. Actual authority – which may be express or implied – is created by an agreement between A and P to which they alone are parties, and pursuant to which P grants A the right to enter into legal relations with a third party (TP) on P’s behalf.
3. Apparent (a.k.a. ostensible) authority, by contrast, describes a relationship between P and TP, which arises from a representation (which may be made by conduct) made by P (not A) to TP that A has authority on behalf of P to enter into legal relations with TP within the scope of that apparent authority.
4. But apparent authority cannot be relied upon by a TP who is put on inquiry, i.e. fails to make the inquiries that a reasonable person would have made in all the circumstances to verify that the putative A does indeed have authority from P.
5. The expression “usual authority” is generally used to refer to the authority of A to enter into transactions of a type that are ordinarily undertaken by a person appointed to a particular position. But in truth, it encompasses only (i) cases in which A has implied actual authority and (ii) cases in which A only has apparent authority. For that reason, it has the potential to mislead into supposing that there is a further category of authority in addition to actual and apparent authority.
6. In seeing if P has made a sufficient representation as regards apparent authority, depending on the facts of the case it may not be helpful to compartmentalise the relevant events, but rather the correct approach may be to assess the activities of P as a whole and then to ask whether, considered in that way, they constituted the relevant express or implied representation by P that A had authority.