Business Mortgage Finance 6 Plc v Roundstone Technologies Ltd

Ostensible authority depends on a representation or holding out by the putative principal. The indoor management rule does not remove that requirement. A purchaser cannot rely on the authority of a purported receiver without evidence traceable to the company or, where relevant, the validly appointed trustee.

A bona fide purchaser defence presupposes a binding transaction by which the purchaser acquired the relevant property. Contractual protections for purchasers dealing with a trustee or receiver protect dealings with a validly appointed office-holder, not dealings with a person who merely assumes that role. Unusual transaction terms may also put a purchaser on enquiry and make reliance unreasonable.

The claimant sought declarations concerning a securitisation structure and a purported sale of mortgage-related assets to the defendant. The sale agreement had been executed by a person purportedly appointed as receiver by two companies which had themselves purportedly been appointed as trustees.

The defendant was not a party to the earlier proceedings in which Zacaroli J considered the validity of those appointments. The central issues were whether the appointments were valid, whether the purported receiver had actual or ostensible authority, and whether contractual purchaser protections or the bona fide purchaser doctrine nevertheless bound the claimant.

1. Invalid appointments. The court adopted the reasoning of Zacaroli J in Business Mortgage Finance 6 Plc v Greencoat Investments Ltd and Others, [2019] EWHC 2128 (Ch). The purported noteholder could not appoint additional trustees because it was not an Instrumentholder as defined. In any event, the proposed resolutions could not validly direct the appointment, and the trustee’s independent interests-of-Instrumentholders function could not be displaced. The purported trustees therefore had no power to appoint a receiver.
2. Authority. The sale agreement was not binding on the claimant. The purported receiver had no actual authority. Following East Asia Company Limited v PT Satria Tirtatama Energindo, [2019] UKPC 30, ostensible authority required a representation by the putative principal, traceable to the claimant or the valid trustee, that the person had authority. No such representation existed. The rule in Royal British Bank v Turquand, (1856) 6 E&B 327, could operate only after ordinary agency principles had independently established actual or ostensible authority.
3. Purchaser arguments. Since no binding sale had been established, the defendant could not show that it was a purchaser of the claimant’s assets for the purposes of a bona fide purchaser defence. In any event, that defence applied only to acquisition of the legal estate, whereas the trust receivables had purportedly been transferred only beneficially.
4. Enquiry. The unusual commercial terms, including immediate transfer for £1, delayed unsecured consideration and limited recourse, were sufficient to put the defendant on enquiry. Reasonable enquiries of the claimant and the valid trustee would have revealed the dispute over the appointments.
5. Contractual protections. The purchaser protection in clause 12.2 of the Deed of Charge applied to dealings with the Trustee or a validly appointed Receiver. Clauses 15.2 and 15.4 likewise did not validate acts of a person who was not a Receiver. Clause 21.2 was construed as covering persons who became trustees, including successor trustees, rather than persons merely purporting to act as trustees. Even on the contrary construction, the purported trustees could not act by majority because neither was a Trust Corporation.
6. The claim succeeded. The purported appointments and the sale agreement were ineffective against the claimant. The court directed that an order be drawn giving effect to the judgment.