The Supreme Court has recently issued a decision in the case of Ilott v Mitson turning on the interpretation of the Inheritance (Provision for Family and Dependants) Act 1975 (the Act ). In England and Wales a testator can choose to distribute their estate to anyone subject to the possibility of an excluded person bringing a claim under the Act.
The Court may decide to make financial provision for a dependent of the deceased be it a child, spouse, or former spouse if the Court concludes that the testator failed to make adequate financial provision for them. Such a claim is more likely to succeed if the Claimant is receiving state benefits.
In the recent case of CRJ Services Limited v Lanstar Limited [2011] EWHC 972 (TCC) the lessee disputed liability under 3 Lease Agreements on the grounds that the signatory did not have authority to enter into the Agreements.
The problem for the lessee was that although the signatory was not an employee, he was engaged as a consultant and given the title “Landfill Manager” to run a landfill site operated by the lessee. It was common ground that in this capacity he had actual authority to enter into short term Hire Agreements with the Financier for various items of plant, but it was the lessee’s case that he had no actual or implied authority to enter into long term hire contracts. Nevertheless the signatory entered into two 3 year contracts and a 2 year contract for the hire of plant all of which contained terms that if the lessee terminated the arrangement before the expiry of the fixed period of hire it would be liable to pay 60% of the agreed hire rates for the remaining periods of hire.
The lessee claimed that it had no knowledge that these 3 long term contracts had been signed, and had effected payments on the assumption that as with the short term hire contracts rentals were payable on a monthly basis but without any long term commitment.
When the signatory left his engagement with the lessee as a result of an acrimonious dispute the lessee’s solicitors did not improve the lessee’s prospects of being able to avoid liability by writing to the Financier and stating inter alia that the signatory “…was the Landfill Materials and Recycling Facilities Manager…[and] was required to “run things by” the Finance and Managing Directors”.
The court had little difficulty in rejecting the lessee’s arguments that the signatory to the Hire Agreements lacked the necessary authority to bind the lessee. There was no suggestion that the lessee had taken any steps to inform the Financier that there were limits on the signatory’s authority, and at no stage had the lessee protested or withheld any payments during the periods of hire before termination. Thus although the signatory had no actual authority to contract for long term hire, he clearly had apparent authority on the principles set out by the Court of Appeal in Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480:-
“An “apparent” or “ostensible” authority…is a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor, intended to be and in fact acted upon by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the “apparent” authority, so as to render the principal liable to perform any obligations imposed upon him by such contract…
The representation which creates “apparent” authority may take a variety of forms of which the commonest is representation by conduct, that is by permitting the agent to act in some way in the conduct of the principal’s business with other persons. By so doing the principal represents to anyone who becomes aware that the agent is so acting that the agent has authority to enter on behalf of the principal into contracts with other persons of the kind which an agent so acting in the conduct of his principal business has usually “actual” authority to enter into.”
Comment
The key point in this case is that the lessee by its conduct in allowing the signatory to enter into short term hire contracts effectively clothed him with apparent or ostensible authority to enter into long term hire contracts as well. It would have been different if the signatory had no actual authority to enter into short term contracts either.
An agent or employee cannot clothe himself or herself with authority: the essential point is that it must be the lessee itself which has done some act or made some statement which has the effect of clothing the agent or employee with apparent or ostensible authority.
Thus it is good practice to ensure that in any case of doubt as to the actual authority of a signatory to a Hire Agreement there should be some communication with the Directors or others with senior management responsibility to confirm that the proposed signatory has indeed authority to contract on behalf of the lessee.
Even in cases where actual or ostensible authority in the signatory is lacking it may still be possible to establish liability if the lessee subsequently ratifies its involvement in an Agreement, for example by using the equipment and making payments with knowledge of the lack of authority in the signatory.
Whilst it is too early to predict the likely effects of Brexit on legal issues in the asset finance industry, it is worth noting that much of the current legislation affecting consumer credit derives from EU Directives.
A difficult point of consumer credit law has for some years been the extent to which a one-off or occasional series of transactions may be subject to the need for licensing or authorisation. The issue arose in the recent High Court case of Newmafruit Farms Ltd v Pither [2016] EWHC 2205.
The FCA has now published its finalised guidance (FG17/1) concerning default notices and guarantors under regulated consumer credit and consumer hire agreements.
The FCA previously consulted on its draft guidance twice during 2016, resulting in revised draft guidance in October which took a more burdensome view of funders’ obligations. The Final Guidance is largely unchanged from the October revised draft.
We recently successfully represented a funder at a High Court trial which reaffirmed a number of interesting points for asset financiers involved in funding parts of the motor trade.
The funder had arranged for one of its motor dealer clients to look after vehicles which had been provided by the dealer with finance from the funder but had subsequently been repossessed. There was a verbal agreement for payment of a commission for sales which the dealer achieved in respect of these vehicles.
The FCA has published revised consumer credit information sheets to accompany arrears and default notices, which must be used by funders from 14 April 2017. Until then, the current versions (which have been in force since 2014) must be used after the initial draft of the new versions intended to come into effect this January were found to be defective and had to be withdrawn.
We will shortly be publishing the fourth edition of our popular Guide to Asset Finance Law , which brings the previous third edition published in 2012 right up-to-date with relevant legislative and case law developments, setting out differences between English and Scots law.
Funders with experience in the education sector have for some time been aware of arguments that as a matter of law finance leases with local authority schools may not be enforceable on the grounds that they are ultra vires, and to compound this many schools have threatened legal action claiming repayment of sums paid under such leases. Many tens of millions of pounds are involved and the issue has led to many funders retreating from this type of business altogether.
Rebecca joined Bermans in September 2016 as a Consultant in the Property team.
She has a degree in law & French and qualified as a Solicitor in 2005.
Rebecca advises a variety of clients including SMEs, private individuals and international investors. She specialises in all aspects of commercial property, in particular acquisitions and disposals, landlord and tenant, property finance and property development.
She is also a volunteer for Henshaws Society For The Blind and is a member of Solicitors Regulation Authority.
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