The court had to determine a claim for breach of warranty of authority brought against the respondent solicitors.
The claim arose in the context of a family dispute concerning a company. The claimant (X) had presented a petition in 2014 to wind-up the company on grounds of insolvency. A winding-up order was made in March 2015. The solicitors, who had been appointed in 2014 to act for the company, launched an appeal on instruction from the company’s director (R) and another person in de factor control (D). The appeal was listed for November 2015. However, on 16 October 2015, X wrote to the solicitors questioning R’s status as a director; his appointment as a director had automatically expired on 31 December 2014. The court later declared that R’s appointment had expired on that date, and in light of that conclusion, the solicitors ceased to act for the company. X claimed his costs from the solicitors. It was his case that the solicitors had purported to act for the company in bringing the appeal without any authority to do so.
The solicitors submitted that (1) they had the company’s ostensible authority to bring the appeal; (2) alternatively, they could rely on the Companies Act 2006 s.161.
HELD: (1) The solicitors were ostensibly authorised to act for the company. Ostensible authority provided a defence to a claim for breach of warranty of authority if and to the extent that it put the claimant into the same position he would have enjoyed had there been actual authority, Rainbow v Howkins [1904] 2 K.B. 322 applied. That was a reflection of the principle that a claim for breach of warranty could not put the claimant into a better position than if the warranty had been true, Skylight Maritime SA v Ascot Underwriting Ltd [2005] EWHC 15 (Comm), [2005] P.N.L.R. 25 applied. The solicitors had been properly retained by D on behalf of the company in 2014 and notice of the termination of their retainer was not given to X. He would therefore have been entitled to insist that the company was bound by the actions which the solicitors had taken on its behalf, Scarf v Jardine (1882) 7 App. Cas. 345 applied. The solicitors’ ostensible authority provided an answer to X’s claim for breach of warranty of authority for the period during which the ostensible authority endured, namely until 16 October 2015 which was when X appreciated that he could no longer safely assume that they were acting for the company. After that date, no warranty was given. In no sense were the costs of the dispute after 16 October a loss resulting from the fact that the authority, while it lasted, had been ostensible not actual; if the fact that the authority was ostensible resulted in the claimant being in a better position than if it had been actual, he could not complain of breach of warranty of authority (see paras 40, 43-44, 46-47, 50-51 of judgment).
(2) The solicitors were entitled to rely on s.161 as providing a defence to the claim for breach of warranty of authority for the period before the expiry of R’s appointment was discovered, Morris v Kanssen [1946] A.C. 459 considered (paras 60-62).
(3) The court declined to exercise its supervisory jurisdiction over the solicitors to make a costs order against them. The basis of liability was not made out (para.67).
Claim dismissed
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