AMB Generali Holding AG & Ors v SEB Trygg Holding Aktiebolag & Ors

An agent’s ostensible authority may continue after actual authority has ended where the principal’s representation of authority remains unwithdrawn and the change has not been communicated to the third party.

Ratification requires an unequivocal act of adoption but need not be communicated. A party cannot defeat ratification merely by misunderstanding the legal effect of its own contract.

Proceedings brought in a non-existent entity’s name are not necessarily a nullity. The question is whom the opposing party would reasonably understand to be bringing the claim. A solicitor warrants the existence of an instructing client and authority to conduct the proceedings, but does not strictly warrant that the client has been correctly named.

Following the sale of an insurance company, its former owners commenced arbitration against the purchaser. One vendor had changed its name, transferred certain rights and later merged into AMB Generali Holding AG. The arbitration nevertheless continued in the former vendor’s name after that company had ceased to exist.

SEB sought a declaration that AMB was a party to the arbitration and claimed against three firms of solicitors for breach of warranty of authority. Gloster J, in [2005] EWHC 35 (Comm), held that AMB was bound by the arbitration through actual or ostensible authority, ratification and estoppel. She also found a limited warranty that the solicitors’ client bore the name used in the proceedings and made several costs orders.

The appeals concerned AMB’s participation in the arbitration, whether the proceedings were a nullity, the scope of a solicitor’s warranty of authority and the costs consequences of separate representation.

1. AMB’s appeal was dismissed. The judge’s finding that Professor Hauptmann possessed actual authority to manage the dispute and instruct solicitors could not properly be disturbed. She had considered the material evidence and committed no significant error warranting appellate intervention.

2. Even without actual authority, Professor Hauptmann possessed continuing ostensible authority. A representation that an agent has authority may remain effective after the underlying relationship changes where the third party has not been told that the authority has ended. The representation here arose from his specific entrustment with the dispute, not merely from his former directorship.

3. AMB also ratified its participation. Ratification requires an unequivocal act but need not be communicated to the third party. AMB’s instruction that its name be substituted as the fourth claimant objectively adopted its status as a party. Its limited tactical intentions did not alter that conclusion. A party cannot avoid ratification merely because it misunderstood the legal effect of a contract to which it was subject. Ratification also did not require knowledge of a distinct legal right to elect.

4. Alternatively, AMB submitted to the tribunal’s jurisdiction and was estopped from denying its participation. Having instructed solicitors to present it as a party, AMB could not remain silent while they continued the arbitration so that it might accept a favourable award but resist an adverse one.

5. The arbitration was not a nullity. The principled question was whom SEB would reasonably have understood to be bringing the claim. The pleadings unequivocally identified the joint vendors, and the incorrect corporate name was a misnomer capable of correction.

6. The solicitors’ appeals were allowed. A solicitor conducting proceedings warrants that an existing client has authorised the proceedings. The solicitor does not additionally warrant that the client has been correctly named. Imposing strict liability for a misnomer, including a typographical error or corporate name change, would be unjustified.

7. P&J’s costs appeals were dismissed. The judge was entitled to limit recovery to 50% because the separately represented firms had presented a substantially united case. She was also entitled to prevent P&J from passing to AMB the costs occasioned by its disproportionate joinder of Mr Merrifield. Mr Merrifield’s contingent cross-appeal did not arise for decision.

• Court of Appeal (Civil Division): In [2005] EWCA Civ 1237, dismissed AMB’s appeal concerning participation in the arbitration, allowed the solicitors’ appeals concerning warranty of authority, and dismissed P&J’s costs appeals.
• High Court, Commercial Court: In [2005] EWHC 35 (Comm), Gloster J held that AMB was bound by the arbitration, found the solicitors liable on a limited warranty as to the client’s name, and made the disputed costs orders.