New Falmouth Resorts Limited v International Hotels Jamaica Limited (Jamaica)

Actual authority is express or implied and must derive from the company’s authorisation or conduct. An agent’s self-description cannot create it.

Ostensible authority requires a representation by the principal, intended and in fact relied upon by the contractor. Late company returns cannot support an earlier contract where they could not have induced the transaction. A statutory provision validating defective appointments does not cure complete non-appointment or override substantive appointment rules.

A company may nevertheless ratify an unauthorised contract. Valid ratification operates retrospectively from the date of the transaction.

The appellant owned Lot 3A, land adjacent to the Starfish Hotel in Jamaica. In 1982, an agreement for its sale to National Hotels and Properties Ltd was signed on the appellant’s behalf by John Phelan. Completion did not occur, and the respondent, as assignee of the agreement, remained in possession.

The Supreme Court of Justice of Jamaica dismissed the appellant’s claim for possession and damages. The Court of Appeal dismissed the appeal. Before the Privy Council, the remaining issues were whether John had actual or ostensible authority to enter the agreement and, alternatively, whether the appellant ratified it at a board meeting on 21 June 1982.

1. Disposition. Sir Alan Ward, delivering the judgment of the Board, held that the appeal should be dismissed with costs. The respondent was entitled to possession because the sale agreement had been validly ratified.
2. Actual authority. Actual authority may be express or implied. Express authority requires authorisation by the company, such as a board resolution. Implied authority depends on the conduct and circumstances of the parties, including the usual authority arising from appointment as managing director. There was no evidence that John had received express authority. The company’s records showed that Mr Chisholm remained managing director when the agreement was signed and that he, rather than John, had been given authority to contract for the sale of company land. John’s own assertion that he was managing director could not confer authority.
3. Ostensible authority. The Board applied the principles stated in Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480. Ostensible authority requires a representation by the principal, intended to be acted upon and actually relied upon by the contractor. The agreement did not identify John’s position. Although annual returns described him as a director, the relevant returns were filed in 1992, long after the transaction, and could not have induced it. No other company conduct established the necessary representation. John had also ceased to be a director and there was no evidence of his reappointment.
4. Defective appointment. Section 172 of the Companies Act 1965 could validate acts despite a defect in appointment or qualification, but, applying Morris v Kanssen 1946 A.C. 459, it could not cure non-appointment or override substantive appointment requirements.
5. Ratification. The Board applied the principle that acts outside an agent’s actual authority may be adopted and ratified, with retrospective effect from the date of the transaction. Frank Phelan was properly treated as a director on the unusual evidence, including successive company records, his conduct and the absence of any disqualifying event. The resolution approving the agreement was therefore passed by a majority of at least two to one. No casting vote was required. Ratification cured John’s original lack of authority, making the sale valid.

1. Privy Council: On appeal from Jamaica, the Board advised Her Majesty to dismiss the appeal with costs: [2013] UKPC 11.
2. Court of Appeal of Jamaica: On 15 April 2011, dismissed the appellant’s appeal with costs. Final leave to appeal to Her Majesty in Council was granted on 23 January 2012.
3. Supreme Court of Justice of Jamaica: Hibbert J dismissed the appellant’s claims on 20 February 2009 and entered judgment for the respondent with costs.