GPN Ltd. v O2 (UK) Ltd.

For ostensible authority to arise, the principal must make, or permit, a representation that the agent has authority to bind it. An agent’s own conduct cannot ordinarily constitute the principal’s representation. Engagement to negotiate contractual terms, silence about limits on authority, and the agent’s agreement of some terms without reference back are insufficient where the circumstances indicate that the agent must refer matters to the principal. A professional engaged to negotiate, such as a quantity surveyor, is not thereby presumed to have authority to conclude the contract. Strong facts are required to establish otherwise. Subjective belief, contractual wording relied on retrospectively, and post-contract events do not supply the necessary representation.

The claimant alleged that it had entered into a bespoke contract with the defendant for 3G site works, although the proposed written contract was never signed. It relied, among other grounds, on ostensible authority, contending that McCreadies and its representatives had been held out as having authority to bind the defendant.

The defendant accepted that McCreadies had authority to negotiate terms, but denied that it had authority to conclude a binding contract. The application concerned only ostensible authority and was made under CPR Part 3.4(2)(a) and CPR Part 24. The central issue was whether the pleadings and evidence disclosed a real prospect of establishing a representation by the defendant that McCreadies could bind it.

1. The application was granted. The claimant had no real prospect of succeeding on the ostensible-authority claim, and that head of claim was struck out and/or summarily dismissed.

2. Ostensible authority requires a representation by the principal, by words or conduct, that the alleged agent has authority to bind the principal. Conduct by McCreadies themselves could not constitute a representation by the defendant. The claimant’s pleading expressly disavowed reliance on McCreadies’ conduct as a representation by or on behalf of the defendant.

3. The defendant’s engagement of McCreadies to negotiate terms did not represent that McCreadies could conclude the resulting contract. Silence about restrictions on authority was insufficient, whether considered alone or together with the engagement. The fact that McCreadies agreed some terms without reference to the defendant did not establish ostensible authority, particularly because they referred other matters back to the defendant. That pattern suggested a limit on their authority.

4. The August 2000 letter of intent indicated a two-stage process: agreement of terms followed by formal execution. It therefore supported the conclusion that McCreadies lacked authority to bind the defendant. The June 2002 correspondence likewise indicated that the defendant’s signature was required.

5. The claimant could not rely on the negotiated contract’s description of McCreadies as Employer’s Agent to establish authority to conclude that contract. That would be a bootstraps argument. Post-contract implementation and the claimant’s subjective belief were also irrelevant to the existence of the necessary representation.

6. The court accepted the distinction between authority to negotiate and authority to bind a principal to a concluded contract. In the circumstances, there were no strong facts capable of rebutting the ordinary position that a quantity surveyor has no ostensible authority to conclude the employer’s contract.

First-instance decision. No appellate history was stated in the judgment.