KB-2025-001929 - [2025] EWHC 2966 (KB)

The defendant relies on the concept of ostensible authority as set out notably in Ukraine v Law Debenture Trust Corp Plc [2024] A.C. 411 (“Ukraine”). The Supreme Court said at para 39:

“Apparent or ostensible authority, on the other hand, describes a relationship between the principal and a contractor which arises from a representation made by the principal to the contractor that an agent has authority to enter on behalf of the principal into a contract within the scope of that apparent authority. The representation, if acted upon by the contractor, by entering into a contract with the agent, creates an estoppel, preventing the principal from asserting that he is not bound by the obligations which the contract imposes on him: Freeman & Lockyer, at p 503 per Diplock LJ. For the estoppel to operate the representation must be one upon which the contractor could and did reasonably rely. The doctrine protects a contractor who is entitled to assume that the person with whom he is dealing has the authority which he appears to have. But the principle cannot be relied upon by a contractor who is put on inquiry, by which we mean that the contractor fails to make the inquiries that a reasonable person would have made in all the circumstances to verify that the person with whom he is dealing does indeed have authority: East Asia Co Ltd v PT Satria Tirtatama Energindo [2020] 2 All ER 294 (“PT Satria”) , paras 92 and 93.”

The court observed (para 40) that the representation which forms the basis for ostensible authority may be made by conduct. In this, the court referenced the much-cited dictum of Robert Goff LJ in Armagas Ltd v Mundogas SA (The Ocean Frost) [1986] AC 717 (“The Ocean Frost”), where the court said at 731D-E:

“The representation which creates ostensible authority may take a variety of forms; but the most common is a representation by conduct, by permitting the agent to act in some way in the conduct of the principal’s business with other persons, and thereby representing that the agent has the authority which an agent so acting in the conduct of his principal’s business usually has.”

Relying on Ukraine and The Ocean Frost, the defendant submits that Orange represented to Shein that Bill had authority to enter the SA. Such representation was made by Orange’s conduct in permitting Bill to act in such a way in relation to its business as to represent that he had authority to enter into the SA on its behalf, and all the evidence supports this. As a result, Shein reasonably relied on such representation and made such enquiries as a reasonable person would have done in all the circumstances to verify the authority of Bill.