Acute Property Developments Ltd v Apostolou & Ors

Apparent authority is founded on estoppel, so the customer must have relied on a representation by the principal as to the agent’s authority. Personal confidence in the agent, without reliance on the principal’s representation, is insufficient.

A manager of a limited company ordinarily has authority to seek payment due to the company, but not to direct payment to a third party without a good and properly explained reason. If a credible explanation is given and honestly believed, payment may fall within apparent authority. Unexplained payment requests to a manager’s wife or to his own business are outside that usual authority.

Acute carried out building work for Dr Savouri. At the request of Andrew Apostolou, who managed Acute’s business, Dr Savouri paid £155,000 to Apostolou’s wife and to a business operated by Apostolou, rather than to Acute.

The parties agreed that Apostolou had implied actual and apparent authority to seek payment for Acute, but not actual authority to redirect payment to third parties. The central issues were whether Dr Savouri relied on apparent authority and whether the redirection requests fell within Apostolou’s apparent authority.

1. Reliance. Apparent authority is a form of estoppel. The customer must have been induced by the principal’s representation that the agent had authority. Dr Savouri acted honestly, but his decision to follow Apostolou’s instructions resulted from their close personal relationship and implicit trust, not from any representation by Acute. The reliance requirement therefore failed.
2. Extent of authority. The usual authority of a manager of a limited company carrying on a building business does not ordinarily extend to requesting payment of company debts to a third party without a good reason. A properly explained request may fall within apparent authority where the customer believes the explanation honestly. There is little room for a separate “put on enquiry” issue once the transaction is within the employee’s usual authority; suspicion, recklessness or turning a blind eye is relevant to reliance.
3. Requests to pay the manager’s wife and an unconnected business operated by the manager, without explanation, were plainly outside Apostolou’s usual and apparent authority. The payments therefore did not discharge Dr Savouri’s liability to Acute, except to the extent that any sums were subsequently passed to Acute.
4. Quantum was left for a further hearing if not agreed. The court declared that the payments did not discharge liability for the building work, subject to that qualification.