Agency – What authority does a bank’s local relationship manager have?

Partner Jeremy Laws

How much authority does a bank’s local relationship manager have? Commercial Litigation Partner Jeremy Laws reports on a recent case that highlights the importance of requesting proof of an agent’s authority in certain circumstances.

In a recent High Court case a judge found that a bank’s local relationship manager had no actual or ostensible authority to write off its customer’s significant debts.

The customer sought to rely on a letter which had been signed by the bank’s local relationship manager which purported to write off approximately £3million of debts.

It transpired that the manager that initialled the letter had no actual authority to do so. The court considered whether he had “ostensible authority” (essentially where a reasonable third party would believe the agent had the necessary authority). The judge found that the bank had not made any representations to the effect that its manager had such authority. Further, even if the bank had made such representations, the court found that it would have been unreasonable for the customer to rely on them.

Most cases on an agent’s authority are decided on their particular facts. It was notable in this case that the debts were significant, and this alone was found to be sufficient to put the customer on notice that the manager may not have had the requisite authority.

The case acts as a useful reminder to request proof of authority in certain circumstances, for example where what is being done is not in the usual course of the parties’ dealings and/or it concerns a significant stake.

Stavrinides and others v Bank of Cyprus Plc [2019] EWHC 1328 (Ch) (24 May 2019)

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