Winter v Hockley Mint Ltd

A principal is vicariously liable for an agent’s fraudulent misrepresentation only where the deceit falls within the agent’s actual or ostensible authority. Ostensible authority requires a holding out by the principal, intended to be and actually relied upon by the claimant. A broad inquiry into fairness or the closeness between the wrongdoing and the agent’s authorised activities is insufficient for a reliance-based tort.

An intention to benefit the principal does not independently establish liability. Ratification requires the principal to know all essential facts. Where the trial court applies the wrong test but the evidence may support ostensible authority, the issue may require rehearing rather than outright dismissal.

Hockley Mint entered three equipment-leasing transactions after Mr Ramsden fraudulently represented that continuing postal credits would exceed its lease payments. The equipment was supplied by Mr Winter, trading as Erskine Hathaway, and Mr Ramsden negotiated the transactions on that business’s behalf.

HHJ Purle QC found Mr Winter innocent of the fraud but vicariously liable for Mr Ramsden’s deceit, applying fairness and close-connection reasoning. The relevant judgments were reported as [2017] EWHC 3748 (Ch) and [2018] EWHC 846 (Ch). Mr Winter appealed the damages award. Hockley Mint sought to uphold it by alleging that he was directly liable in deceit and unlawful means conspiracy.

The central issue was whether liability for an agent’s fraudulent misrepresentation depended upon actual or ostensible authority, rather than the general close-connection test for vicarious liability.

1. The appeal succeeded on the governing legal test. Binding authority established that a principal is vicariously liable for an agent’s deceit only where the fraudulent conduct falls within the agent’s actual or ostensible authority. Ostensible authority requires a representation or holding out by the principal, intended to be and actually acted upon by the claimant, that the agent possessed the relevant authority. The agent’s own assertion of authority cannot by itself supply the necessary holding out: Armagas Ltd v Mundogas SA [1986] 1 AC 717 applied.

2. The judge had instead asked whether it was just and fair to impose liability and whether the fraud was sufficiently closely connected with the authorised selling activities. That approach, derived from Lister v Hesley Hall Ltd [2001] UKHL 22 and Dubai Aluminium Co Ltd v Salaam [2002] UKHL 48, did not govern a reliance-based tort. Those cases concerned conduct in the ordinary course of employment or a firm’s business, without questions of reliance or a principal’s holding out.

3. The agent’s intention to benefit the principal did not create an independent basis of liability. Neither Lloyd v Grace, Smith & Co [1912] AC 716 nor Lister established that benefit to the principal invariably sufficed in deceit cases. Adoption of an unauthorised act would amount to ratification and required the principal to know all essential facts. Ratification had neither been pleaded nor found.

4. The judge had not found that the fraudulent transactions fell within Mr Ramsden’s express actual authority. Nevertheless, the evidence was capable of supporting ostensible authority. It included Mr Winter’s provision of contractual documents and business notepaper, his authorisation of an Erskine Hathaway email address and pseudonym, and his payment of rebates against invoices referring to postal savings. Whether Hockley Mint relied upon those matters required evaluation at trial.

5. The issue of ostensible authority was remitted for rehearing by a different Chancery Division judge. The Court of Appeal declined to determine contested evidence as though it were the trial court and refused permission for the additional grounds which consequently did not arise.

6. Hockley Mint’s respondent’s notice was dismissed. The trial judge had adequately explained why Mr Winter was not a knowing participant in deceit or conspiracy. His factual findings were not plainly wrong, irrational or incapable of reasonable justification.

1. Court of Appeal (Civil Division): By [2018] EWCA Civ 2480, held that the wrong legal test had been applied, dismissed the respondent’s challenge to the finding that Mr Winter was not dishonest, and remitted ostensible authority for rehearing.
2. High Court, Chancery Division: In judgments reported as [2017] EWHC 3748 (Ch) and [2018] EWHC 846 (Ch), HHJ Purle QC found Mr Ramsden’s fraud proved, rejected personal dishonesty by Mr Winter, and held Mr Winter vicariously liable. An order dated 7 February 2018 awarded damages of £531,803.98.