ING RE (UK) Ltd. v R & V Versicherung Ag

Ostensible authority requires a representation traceable to the principal, or to an agent whose own authority is so traceable, and reasonable reliance on that representation. A document cannot ordinarily be relied upon as a representation where the recipient believes it was not intended for them. The recipient must also rely on a representation about the relevant agent’s identity, status or authority; private assumptions are insufficient. For ratification, knowledge of the essential transaction may suffice, without knowledge that the agent exceeded authority. Silence amounts to ratification only where adoption is the only reasonable conclusion from the circumstances.

The claimant entered an 85% quota share reinsurance treaty with Risk Insurance and Reinsurance Solutions, purportedly acting for the defendant. Risk lacked actual authority. The claimant relied on a general authority letter, a memorandum of authority and a fax from a senior defendant employee. The claimant alleged that the defendant was bound through ostensible authority or ratification. The central issues were whether the documents constituted representations on which the claimant could reasonably rely, and whether the defendant’s knowledge and subsequent inaction ratified the treaty.

1. Ostensible authority. The doctrine is founded on estoppel by representation. A principal is bound where it represents, or causes to be represented, that an agent has authority and the third party deals with the agent in reliance on that representation. The same principle can operate through a chain of representations, provided the agent’s authority is ultimately traceable to the principal or to a person with actual authority. The court accepted that this possibility was recognised in British Bank of the Middle East v Sun Life Assurance Co of Canada (UK) Ltd [1983] 2 Lloyd’s Rep 9 and Armagas Ltd v Mundogas SA [1986] 1 AC 717.
2. The general authority letter established a relationship between the defendant and Risk but did not represent that Risk could enter the quota share treaty. The memorandum was a summary of a fuller agreement. Its wording and period clause gave a reasonable underwriter cause to investigate whether retrospective quota share business fell within the underlying authority. The claimant was not reasonably entitled to infer that it did.
3. The fax could not assist the claimant. Mr Emerson believed that it was not intended for him, and there was no representation by the defendant identifying its author or establishing his authority. The claimant’s assumptions about the author’s seniority were not representations by the defendant. The defendant was therefore not estopped from denying Risk’s authority.
4. Ratification. Knowledge that the agent had entered into the treaty purportedly on the principal’s behalf was sufficient knowledge of the transaction for ratification. It was unnecessary for the principal also to know that the agent had acted without authority. The defendant’s silence did not amount to ratification because it was reasonably attributable to uncertainty about its legal position. Adoption had not been shown to be the only reasonable conclusion.
5. The claim therefore failed on both ostensible authority and ratification.