Monday, 29 November 2010

Hong Kong: Court of Final Appeal considers apparent authority of executive chairman and chief executive

The Hong Kong Court of Final Appeal has considered, in Thanakharn Kasikorn Thai Chamkat (Mahachon) v Akai Holdings Ltd. (FACV No. 9 of 2010), whether a company's executive chairman and chief executive (Mr Ting) had the apparent authority to enter various transactions with a bank: see here. The court's judgment was delivered earlier this month; Lord Neugerger of Abbotsbury, sitting as a non-permenant judge of the court, delivered the only reasoned opinion with which the other judges agreed.

Lord Neuberger stated that the bank would be able to rely on Mr Ting’s apparent authority (if he had such authority) unless its belief in this regard was dishonest or irrational (which included turning a blind eye and being reckless). His Lordship found that Mr Ting did not have apparent authority in respect of the transactions, although he noted noted that Mr Ting would, as executive chairman and chief executive, possess "a large measure of apparent authority - indeed, no doubt he would have had a large measure of actual authority" (para. [81]). Significant in this regard was Lord Neuberger's finding that the bank was irrational in its belief that Mr Ting had authority, not least because of the "peculiar" nature of the transactions, which benefited another company sharing the same parent as the company and under which the company gained a substantial liability.

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