Zoya Ltd v Sheikh Nasir Ahmed (t/a Property Mart) & Ors

A solicitor conducting litigation for a supposed client ordinarily gives an implied warranty of authority. Liability for breach is strict, but the opposing party must show reliance on the warranty and a causal connection between the breach and the loss claimed. Where the opposing party knew from the outset that authority was disputed, costs incurred in challenging that authority were not incurred on the faith of the warranty.

A solicitor may cease to warrant authority where the litigation becomes a free-standing determination of the authority issue. A summary costs remedy remains discretionary and may be refused where no recoverable loss is attributable to the warranty.

The claimant company’s proceedings against the defendant were struck out as an abuse of process after the court held that John Haastrup was not entitled to the claimant’s shares and had not been validly appointed as its director. The claimant did not appear at the disposal hearing.

The defendant sought costs against the solicitors who had issued and conducted the proceedings in the claimant’s name. He relied on breach of warranty of authority and, alternatively, the wasted costs jurisdiction. The issues were the scope of the warranty, whether it continued after authority became the subject of preliminary issues, and whether the defendant had relied on it or suffered loss caused by its breach.

1. Disposition. The court dismissed the defendant’s application for a summary order against the solicitors for breach of warranty of authority. It had already refused a wasted costs order because the solicitors’ conduct did not sufficiently establish an improper, unreasonable or negligent act causing additional costs.
2. A solicitor purporting to act in litigation ordinarily warrants that there is a client bearing the name of the party and that the client authorised the proceedings. The warranty does not extend to the client’s title to sue, solvency, cause of action, defence or other attributes. Liability is strict and does not depend on the solicitor’s knowledge of the want of authority: Yonge v Toynbee [1910] 1 KB 215; Nelson v Nelson [1997] 1 WLR 233; SEB Trygg Liv Holdings AB v Manches [2006] 1 WLR 2276.
3. The implied warranty may be excluded by the facts. Reliance or inducement and a causal link between the breach and the claimed loss are required. The defendant knew before issue that authority was disputed and challenged it in his defence, so he incurred no relevant costs on the faith of the warranty.
4. The court followed Re Sherlock Holmes International Society Ltd [2016] EWHC 1392 (Ch) on the change in position when litigation becomes a free-standing determination of authority. Before 10 August 2015 the solicitors continued to warrant that they represented the claimant. After the preliminary issues were ordered, the proper inference was that they no longer warranted authority.
5. The court applied section 51 of the Senior Courts Act 1981. The evidence did not establish that the solicitors’ conduct caused additional costs or, in the summary fault-based jurisdiction, amounted with sufficient clarity to improper, unreasonable or negligent conduct.