Armagas Ltd v Mundogas SA (‘The Ocean Frost’): HL 22 May 1985

Ostensible authority creates estoppel

Apparent authority as agent can arise where an employer by words or conduct has represented that his employee, who has purported to act on behalf of the employer, is authorised to do what he is purporting to do. Ostensible authority depends on a holding out by the principal which creates an estoppel.
Lord Keith said: ‘Ostensible authority is general in character, arising when the principal has placed the agent in a position which in the outside world is generally regarded as carrying authority to enter into transactions of the kind in question. The acts of the purported agent are not themselves evidence and are irrelevant to establish such agency as against the principal.’
and ‘At the end of the day the question is whether the circumstance under which a servant has made the fraudulent misrepresentation which has caused loss to an innocent party contracting with him are such as to make it just for the employer to bear the loss. Such circumstances exist where the employer by words or conduct has induced the injured party to believe that the servant was acting in the lawful course of the employer’s business. They do not exist where such belief, although it is present, has been brought about through misguided reliance on the servant himself, when the servant is not authorised to do what he is purporting to do, when what he is purporting to do is not within the class of acts that an employee in his position is usually authorised to do and when the employer has done nothing to represent that he is authorised to do it.’
The court considered the vicarious liability for the acts of an employee: ‘The essential feature for creating liability in the employer is that the party contracting with the fraudulent servant should have ordered his position to his detriment in reliance on the belief that the servant’s activities were within his authority, or, to put it another way, were part of his job, this belief having been induced by the master’s representations by way of words or conduct.’

Keith, Brandon, Templeman, Griffiths, Oliver LL
[1986] AC 717, [1985] UKHL 11, [1986] 2 All ER 385, [1986] 2 WLR 1063, [1986] 2 Lloyd’s Rep 109, (1986) 2 BCC 99197
England and Wales
Appeal fromArmagas Ltd v Mundogas SA (‘The Ocean Frost’) CA 1985
Proof of corruption not needed for bribe
In establishing that money was paid as an improper inducement or bribe, proof of corruptness or a corrupt motive was unnecessary.
When a court looks at a decision of a judge at first instance, the court stressed the need to look at the . .

Cited by:
CitedBloggs 61, Regina (on the Application of) v Secretary of State for the Home Department CA 18-Jun-2003
The applicant sought review of a decision to remove him from a witness protection scheme within the prison. He claimed that having been promised protection, he had a legitimate expectation of protection, having been told he would receive protection . .
AppliedFarrer and Another v Messrs Copley Singletons (Formerly Known As Messrs Gowan and Singleton) (a Firm) CA 17-Jul-1997
Four clients together instructed the solicitor to act in the purchase of land. It was agreed to be urgent. One client gave instructions that the solicitor need not undertake the searches he would normally undertake. He acted upon them.
Held: . .
CitedBakhitar v Keosghgerian and Others QBD 3-Dec-2003
Employer liable for employee with criminal record
An employee of a firm of solicitors took pawned jewellery to show to a third party possible purchaser. The jewels were misappropriated.
Held: The person involved, who was known to have a criminal record for fraud was for all relevant purposes . .
CitedHenry v British Broadcasting Corporation QBD 9-Mar-2006
The claimant said that the defendant had accused her of falsifying hospital waiting statistics. The defendant pleaded justification.
Held: There were stark differences in the evidence given by different witnesses. Nevertheless the evidence . .
CitedGolden Ocean Group Ltd v Salgaocar Mining Industries Pvt Ltd and Another ComC 21-Jan-2011
The defendants sought to set aside orders allowing the claimants to serve proceedings alleging repudiation of a charterparty in turn allowing a claim against the defendants under a guarantee. The defendant said the guarantee was unenforceable under . .

Lists of cited by and citing cases may be incomplete.

Agency, Torts – Other

Leading Case

Updated: 10 November 2021; Ref: scu.183655

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