The High Court (Chancery Division) has today handed down judgment in Stavrinides & Othrs v Bank of Cyprus Public Company Limited  EWHC 1328 (Ch), dismissing a claim by a group of customers for specific performance of a purported settlement agreement. The case involved serious allegations of fraud and forgery on both sides, but following a two-week trial Mr John Kimbell Q.C. (sitting as a Deputy Judge of the High Court) had “no hesitation” in concluding that the purported settlement was a false instrument created by the Claimants in concert with one of the Bank’s junior employees for the purposes of defrauding the Bank.
The facts of the case were colourful, but the dispute also raised some interesting legal issues in relation to the apparent authority of putative agents and the circumstances in which a party will be entitled to rely on an express or implied representation of authority. In particular, the Judge considered the distinction between ‘transactional’ and ‘conduit’ authority: in cases of transactional authority, the agent has apparent authority to conclude the transaction in question by the conveyance of a binding offer, whereas in cases of conduit authority, the agent’s authority is limited to conveying or communicating the information that the offer has been accepted. The Judge referred to a recent article by Professor Sarah Worthington (‘Corporate Attribution and Agency: back to basics’ (2017) LQR 118), approving her analysis that the remedy in transactional and conduit authority cases may be different: in the former, the contract is prima facie enforceable by the representee, whereas in the latter the representee will generally be limited to claiming reliance losses.
On the facts of the case, the Court found that the Bank had not made any representation that the junior employee in question was clothed with either transactional or conduit authority in relation to the purported settlement (which was worth over £3 million), and there was in any event no reasonable or subjective reliance by the Claimants: the letter evidencing the supposed settlement was on its face such an extraordinary and surprising document that the Claimants would have been put on enquiry even if the Court had not been satisfied that they had been party to the fraud.
The Bank was fully successful on its £5.5 million counterclaim.
A copy of the judgment can be found here.