Monday 1 July 2019

UK: JCPC opinion on apparent authority

The Judicial Committee of the Privy Council handed down its opinion last week in East Asia Company Ltd v PT Satria Tirtatama Energindo (Bermuda) [2019] UKPC 30: see here or here (pdf). A summary of the opinion is available here (pdf).

In a case concerning the principles of apparent authority, the Board upheld the decision of the Court of Appeal of Bermuda (here, pdf) that a director did not have the apparent authority to enter into a share sale agreement, contained within a heads of agreement document, on the company's behalf. Amongst the factors leading to this conclusion was the absence of reliance on any representations made by the company.

Of particular interest - and importance - is the discussion the Board provides, albeit obiter, about the extent to which a party can rely on apparent authority where they are "put on inquiry" as to the agent's authority (or lack thereof). In such cases, the Board accepted that in order to rely on the apparent authority of a director, the third party must have made the inquiries that a reasonable person would have made in all the circumstances in order to verify that director's authority. In adopting this test, the Board rejected the position adopted by Lord Neuberger in Akai Holdings Ltd v Kasikornbank Public Co Ltd [2010] HKCFA 64, [2011] 1 HKC 357, that reliance was permitted unless the third party knew of the agent's lack of authority, was dishonest or irrational, or reckless in his belief or turned a blind eye.

Update (18 July 2019) - a summary has been published by the ICLR: see here.

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