The Privy Council in East Asia Company Ltd v PT Satria Tirtatama Energindo (a case on appeal from Bermuda) has provided clarification on the correct approach to the reliance aspect of apparent authority. Reliance can be of particular importance where the third party has been put on notice as to the agent’s lack of authority: e.g. when the transaction is unusual or especially onerous for the principal. The Privy Council concluded, albeit obiter, that the correct test is one of reasonable reliance by the third party. In doing so, it has rejected the approach adopted by Lord Neuberger NPJ in the Hong Kong case of Akai Holdings and subsequently followed in a number of English decisions: i.e. reliance by the third party is presumed in the absence of dishonesty or irrationality.
- apparent authority
- company directors