Excel Securities Plc v Masood & Ors

An implied warranty of authority ordinarily warrants that an agent has authority to act for the person represented as principal. It does not ordinarily warrant the principal’s identity, title, solvency or other attributes. The scope of the warranty is an objective question determined by the circumstances known when it arose. For professional advisers, the default obligation is reasonable skill and care; an absolute obligation requires special facts or clear language. Summary judgment is inappropriate where reliance remains materially uncertain, even if fraud is strongly inferred.

Excel Securities Plc advanced money for a proposed mortgage transaction after dealing with a person who claimed to be James Charles Whittaker Goulding. The First and Second Defendants, solicitors practising as BM Solicitors, acted for that person, confirmed that they acted for him, witnessed the facility letter and transferred the loan proceeds as instructed.

The transaction appeared to involve identity theft. Excel alleged that the solicitors had breached an implied warranty of authority by warranting both their authority to act and the identity of their client. It sought summary judgment under the warranty claim and, additionally, advanced a breach of trust claim. The central issues were the scope of the implied warranty, reliance, and whether the claims had no real prospect of successful defence.

1. Application dismissed in relation to breach of warranty of authority. The evidence gave rise to a virtually irresistible inference that the solicitors’ client was an impostor. Nevertheless, reliance remained insufficiently clear for summary determination. Excel had conducted its own identity inquiries and might have proceeded on the basis of those inquiries rather than any warranty concerning identity. That issue required trial.
2. An agent ordinarily gives an implied contractual warranty that he has authority to act for the identified principal. The warranty protects the counterparty against lack of authority, not generally against the commercial risk that the principal is not who he claims to be or lacks title to property.
3. The precise scope of the warranty depends on the circumstances known to the parties when it arose. In this case the solicitors warranted that they had authority to act for a person using the name James Charles Whittaker Goulding and claiming to be the registered proprietor of the property. They did not warrant that he was in fact that individual or that he held title.
4. The reasoning in SEB Trygg Liv Holding Aktiebolag v Manches [2006] 1 WLR 2276 and Midland Bank plc v Cox McQueen [1999] PNLR 593 supported this limitation. Professional advisers are not readily treated as insurers against fraud. An unqualified obligation requires special facts or clear language.
5. The breach of trust application was stood over. There were preliminary questions about the intended recipient of the money and the possible availability of relief for an honest and reasonable trustee. Costs and consequential matters were also stood over.

First-instance decision. The judgment does not state any appellate history.