Court of Appeal Clarify Law on Agency
 

25 January 2011

The Court of Appeal has clarified that law on apparent authority in the case of Paul Quinn v CC Automotive Group Limited t/a Carcraft the court stated that (contrary to suggestions in other authorities and texts) that once it was established that there was a representation of authority relied upon by a party there is no need to inquire as to whether or not that reliance was reasonable or whether the party was put on inquiry as to the lack of authority. 

The Court held that the judge had erred in importing an inquiry test and in applying an objective reasonableness test in relation to the imported inquiry test. Given the conclusions the judge reached in respect of K's apparent authority and Q's honest belief in, and reliance on, R's representation as to that authority there was neither room nor need for any inquiry test. The fact that Q was taken in by K's deceit whereas by the exercise of reasonable care they may not have been was irrelevant. The transaction was within the class of acts that a car salesman such as K was usually authorised to do. Given that Q and R were innocent parties, on the facts of the case, it was right that R should bear the loss occasioned by K's deceit (see paras 25-27 and 29 of the judgment).

Of interest is the fact that the Court of Appeal did not consider the requirement for the representee to have a belief which was “rational” as had been referred to by the Master of the Rolls in the Appeal Court of Hong Kong in the case of Akhai Holdings referred to in the judgment. It will be interesting to see how (if at all) this may be followed in subsequent cases.

Paul Lakin instructed by Chadwick Lawrence acted for the Appellant.

Mark Harper instructed by Greenhalghs acted for the Respondent.

Full judgment can be assessed here.

If you have any queries about the detail of the issues in the proceedings, which are not apparent from the judgment, then Paul and Mark are happy to be contacted in chambers to assist.