A/S Dan Bunkering Ltd v F G Hawkes (Western) Ltd & Ors

Actual authority depends on the legal relationship between principal and agent, construed from the parties’ agreement, proper implications, trade usage and course of dealing. Ostensible authority requires a representation by the principal to the contractor. An agent cannot ordinarily create ostensible authority by representing his own authority. A separate authority to represent that a guarantee has been given may nevertheless exist, but cogent evidence is required where the agent lacked authority to sign the guarantee itself. Authority may be inferred from the principal’s established course of dealings and the surrounding documents.

The claimant supplied marine bunkers to a vessel chartered by Alani Shipping Co Ltd and sought payment from F G Hawkes (Western) Ltd under an alleged guarantee. The guarantee bore a manuscript signature which was not that of the company’s principal director. The claimant alternatively alleged that the relevant agent had actual or ostensible authority to sign the guarantee, or to represent that it was valid.

The court determined whether the guarantee had been executed with actual authority and, alternatively, whether the claimant could rely on ostensible authority or estoppel.

1. Actual authority. The guarantee was signed with FGH’s actual authority. The court found that the signature was made either by a person in FGH’s office or by Mr Orrells, or someone in his office, with authority from Mr Hawkes. Alternatively, the authority was implied from the established course of dealings.
2. The surrounding documents, including guarantees, fixture notes and operational letters bearing the same signature, showed that Mr Orrells frequently signed documents on FGH’s behalf and that such conduct was authorised or tolerated. The earlier and later guarantees obtained by Mr Hawkes in different circumstances did not displace that conclusion. The court also relied on its adverse assessment of Mr Hawkes’ credibility.
3. Ostensible authority. The alternative claim would have failed. Under Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480, as approved in Armagas Frost Ltd v Mundogas SA (The Ocean Frost) [1986] 1 AC 717, ostensible authority requires a representation by the principal to the contractor. FGH had no direct dealings with the claimant and made no relevant representation. The Lloyd’s MIU report did not establish a holding out.
4. The court accepted that an agent may have actual or ostensible authority to represent that a guarantee has been given, even without authority to sign it, by analogy with First Energy (UK) Ltd v Hungarian International Bank Ltd [1993] 2 Lloyd’s Rep 194. That proposition did not assist the claimant because the necessary representation by FGH was absent.
5. Judgment was entered for the claimant in the full amount claimed.