While he was a judge of the United Kingdom Supreme Court and of the Privy Council, Lord Sumption delivered a number of judgments on points of agency law. My chapter for the festschrift for Lord Sumption, in Challenging Private Law (Hart Publishing, Oxford, 2020), edited by Professor Sarah Worthington and Mr William Day, focuses on three topics and cases, and touches on a number of others.
The first topic is the concept of the communicating agent, or the agent who has no authority to make a contract but has authority to communicate that the principal is willing to contract and on what terms: Kelly v Fraser (2012). Lord Sumption correctly concludes that a principal who allows someone to communicate the contracting decisions of more senior agents can expect the recipient of the communications to rely on them so long as they are within an expected range of decision. Less helpful was the Judge’s endorsement of a dictum in The Raffaella that ‘why should a representation made by A as to his authority not be capable of being relied on as one of the acts of holding out?’. This dictum suggests that an agent can self-authorise, something that is very doubtful and not something that was necessary for the decision in Kelly v Fraser.
The second topic concerns the circumstances in which an agent's authority is terminable: Angove's Pty Ltd v Bailey(2016). Lord Sumption confirmed the longstanding general principle that a principal can withdraw an agent’s authority at any time, even if that involves a breach of contract by the principal. However, Lord Sumption also said that he did not think that the exceptions to this general principle were confined to non-fiduciary agents. The chapter disagrees with this view. It is desirable to keep the exceptions to the principle within clear and defined limits. The principle itself is intimately connected with the confidence a principal has in the agent. Only those cases where there never was any trust involved are suitable for non-revocable authority.
The third topic addresses the question whether there is any scope for the concept of the undisclosed principal in the tort of negligent misstatement: Playboy Club London Ltd v Banca Nazionale del Lavoro SpA (2018). Lord Sumption answered that question in the negative. The case was concerned with an inaccurate credit reference given by the Bank to an inquirer which was then passed on to, and relied upon by, the Playboy Club. The Club argued it was the undisclosed principal of the party that had sought the reference. It failed. An assumption of liability is needed for the tort of negligent misstatement and there could be no assumption in favour of a party of whom the maker of the statement had no contemplation. The analysis in the chapter of the issues that arise goes well beyond the rather terse reasoning of Lord Sumption. It is not just that tortious liability is different to contractual liability. The Club was also putting more pressure on the undisclosed-principals doctrine that it warrants even within the law of contract. The doctrine is usually not suitable for situations where the likely loss from a breach of the relevant contract is unpredictable or at large. Loss arising from relying on a negligent misstatement will often be open-ended. This is another reason for being hesitant to conclude that the maker of a statement is willing to indemnify anyone who relies on the statement.
The pre-proof version of the full book chapter is available here.
Professor Peter Watts is a Senior Research Fellow at Harris Manchester College, University of Oxford.
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