Judgments - Criterion Properties plc (Appellants) v. Stratford UK Properties LLC (Respondents) and others

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    28.  This is a case in which Criterion appears to have entered into a contract with Oaktree granting Oaktree the put option that I have described. The SSA was signed by Mr Glaser and Mr Palmer, purporting to do so on Criterion's behalf. Did they have actual authority to do so? That is the first question. But there are sub-questions. It is accepted that Criterion in general meeting did not authorise or subsequently ratify the SSA. But did the board of Criterion do so? If the board did do so, did it have the power to do so? The effect of section 35A of the Companies Act, 1985, may have to be taken into account. If the answer to these sub-questions is 'No', then it would seem to follow that Mr Glaser and Mr Palmer had no actual authority to sign the SSA.

    29.  If Mr Glaser and Mr Palmer had no actual authority to sign the SSA, did they have apparent, or ostensible, authority to do so? The answer to this question depends on a number of considerations as to which there is at present no clear evidence and at least one of which raises an issue of considerable public importance. The issue I have in mind is whether it is open to a board of directors of a public company to authorise the signing on the company's behalf of a "poison pill" agreement intended to deter outsiders from making offers to shareholders to purchase their shares. And, in particular, is it open to a board to authorise the signing of a "poison pill" agreement where, as here, the deterrence consists of a contingent divesting of company assets? The issue of the apparent authority of the board, or of Mr Glaser and Mr Palmer, must also take into account the features of the SSA that went beyond simply including provisions to deter an unwanted predator but would have deterred also the most desirable of predators, would have entrenched the chairman's and the managing director's continuance in their then current offices, and would have put them in a position in which their voluntary decision to relinquish office would potentially attract a heavy financial penalty for their company. Could it be said that they, or any of them, had apparent authority to conclude such an agreement? Here, too, section 35A of the Companies Act, 1985, may be relevant.

    30.  This case turns, in my opinion, on the "authority" issue. If Mr. Glaser and Mr. Palmer either had actual authority to conclude the SSA, given by a person or body with power to confer that authority (see British Bank of the Middle East v Sun Life Assurance Co. of Canada (UK) Ltd. [1983] 2 Lloyds LR 9 and especially Lord Brandon of Oakbrook at p.17), or, if they did not have actual authority, had apparent authority to do so, then I can see no reason why the SSA should not be held enforceable against Criterion. If, on the other hand, Mr Glaser and Mr Palmer had neither actual nor apparent authority to conclude the SSA, then the SSA could not be held enforceable against Criterion. Mr Glaser and Mr Palmer might be liable to Oaktree for breach of warranty of authority, but the SSA would not be Criterion's contract. The conscionability or unconscionability of Oaktree's behaviour in seeking to hold Criterion to the SSA would in either case be irrelevant.

    31.  Both Hart J and the Court of Appeal thought that the SSA was clearly contrary to the commercial interests of Criterion. Hart J thought that Oaktree must have known, or be taken to have known, that that was so. I do not wish to be taken to be saying that knowledge of this sort on the part of Oaktree, or knowledge by Oaktree that Mr Glaser and Mr Palmer were, in signing the SSA, in breach of the duty they owed to Criterion, would be irrelevant to the authority issue. If a person dealing with an agent knows that the agent does not have actual authority to conclude the contract or transaction in question, the person cannot rely on apparent authority. Apparent authority can only be relied on by someone who does not know that the agent has no actual authority. And if a person dealing with an agent knows or has reason to believe that the contract or transaction is contrary to the commercial interests of the agent's principal, it is likely to be very difficult for the person to assert with any credibility that he believed the agent did have actual authority. Lack of such a belief would be fatal to a claim that the agent had apparent authority.

    32.  In my opinion, the authority issue cannot be resolved by your Lordships on this appeal. The authority issue was not addressed in the courts below, as in my opinion it should have been, and as a result your Lordships have not had the assistance of the courts below in identifying the principles which should be applied in determining the issue. Nor have counsel had much opportunity, in the period between the opening of the appeal when my noble and learned friend Lord Nicholls of Birkenhead raised the point and the conclusion of the hearing on the following day, to research the point. Moreover there are, as I have endeavoured to indicate, a number of factual matters that may be relevant to the issue that have not yet been placed in evidence. In these circumstances it seems to me, to my regret, that your Lordships cannot finally resolve the issue here and now but must leave the issue either to be resolved at trial or, perhaps, if Criterion are so advised, on a further CPR Part 20 application.

    33.  I would for these reasons dismiss the appeal.

LORD RODGER OF EARLSFERRY

My Lords,

    34.  I have had the privilege of reading in draft the speech of my noble and learned friend, Lord Scott of Foscote. I agree that for the reasons which he has given this appeal should be dismissed.

LORD WALKER OF GESTINGTHORPE

My Lords,

    35.  I agree that this appeal should be dismissed for the reasons given by my noble and learned friends Lord Nicholls of Birkenhead and Lord Scott of Foscote, whose opinions I have had the advantage of reading in draft.

    36.  This is a contentious case in which both sides launched applications for summary judgment. But in order to do so each side had to make, for the purposes of the applications only, large concessions contrary to the respective cases which the parties wish to put forward at trial. Criterion had to accept that Oaktree did not appreciate that the "poison pill" embodied in the SSA was improper and that Oaktree acted in good faith in agreeing to the SSA. It also had to accept that its Chairman, Mr Nordström, knew that the SSA was being entered into, and indeed instigated it, although Mr Nordström's evidence is that he was entirely ignorant of it.

    37.  This gave the applications for summary judgment a high degree of unreality. There was an obvious need for the real facts to be established at trial, rather than the case being decided on assumed facts which might never be established. I respectfully agree with the views of Carnwath LJ and Brooke LJ [2003] 1 WLR at 2122 and 2123 (paras 40 and 43 respectively) that the parties' actions and states of knowledge must be examined in the context of their commercial relationship as a whole, which can only be done at trial, and that it is pre-eminently a matter which should go forward to trial.

LORD CARSWELL

My Lords,

    

 
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