Carr v Messrs Bower Cotton (A Firm)

Permission to appeal should be granted where the proposed grounds disclose a real prospect of success. That threshold may be met where the first-instance judge arguably adopted too narrow a view of a solicitor’s obligations when holding funds subject to a limited power of attorney and contractual restrictions.

Where an authority permits an agent to withdraw funds only for specified purposes, it is arguable that the holder of the funds must obtain confirmation that a proposed transfer falls within those purposes. Authority for a transfer to one bank does not necessarily authorise a materially different transfer to another bank.

Mr Malcolm Carr sought permission to appeal from an order of Blackburne J dated 19 December 2001 dismissing his claim against Messrs Bower Cotton (A Firm) for approximately US$4 million.

The claim arose after the solicitors transferred investment funds from their client account to a bank account controlled by persons acting under a limited power of attorney. The funds were subsequently misappropriated. Carr contended that the solicitors lacked authority to make the transfer and had duties under the investment agreement, the limited power of attorney, his written instruction, a countersigned letter and a subsequent telephone conversation.

The central question was whether there was a real prospect of success in challenging the judge’s conclusion that the solicitors had no obligation to ascertain whether the proposed transfer was for a permitted purpose and whether Carr had authorised the transfer to the account actually used.

1. Permission granted. Arden LJ concluded that the proposed appeal had a real prospect of success and limited the appeal to whether Bower Cotton had authority to pay the funds to the Unibank account at the request of Adkins and Weaver.
2. The judge had arguably taken too narrow a view of the obligations arising under the limited power of attorney. Its proviso stated that the attorneys were not authorised to withdraw principal funds except for the specified purposes. It was therefore arguable that Bower Cotton had at least to obtain confirmation that the withdrawal was for a proper purpose within the investment agreement and the limited power of attorney.
3. The authority given by Carr concerned a transfer to National Westminster Bank. The requested transfer was instead made to Unibank. Carr had never expressly authorised a transfer to Unibank, providing a further arguable ground.
4. It was arguable that the judge had addressed the wrong issue when relying on the general agency principle that, absent notice to the contrary, a third party acting in good faith may assume that an agent is exercising authority for a proper purpose, referring to Rolled Steel Limited v British Steel Corporation [1986] Ch 246. The relevant question might instead be whether Bower Cotton had a duty to seek confirmation that the transfer complied with the limited power of attorney.
5. The same issues were arguable in relation to Carr’s written instruction, the countersigned letter and the telephone conversation. Nothing in the conversation diminished the written limitation or explained that the destination bank would be Unibank rather than National Westminster Bank.

Costs were ordered to be costs in the case.

• Court of Appeal (Civil Division): permission to appeal granted from Blackburne J’s order, dated 19 December 2001, dismissing Carr’s claim.
• High Court, Chancery Division: claim for damages of approximately US$4 million dismissed by Blackburne J.