Hopkins v TL Dallas Group [2004] EWHC 1379 (Ch)

• Director signed letters of undertaking on behalf of his company to pay £1 million to company B. He did so fraudulently for his own benefit.

• Company B attempted to get payment from director’s company.

Held

• Director does not have actual authority where he acts for:

  1. Improper purposes

  2. Or in bad faith

• Thus where director acts contrary to interests of his company, does not have actual authority.

• This may be case where, e.g. director signs contracts which are very onerous and disadvantageous for his company

Facts

• Director did not have actual authority to sign letters.

  • Did not fall within scope of his implied authority as director

  • He acted in breach of fiduciary duty when doing so

• In addition, Company B could not rely on ostensible authority

  • Very facts which amounted to breach of directors’ duty put Company B on notice of lack of authority

  • I.e. transaction were so disadvantageous to director’s own company that Company B should have known director was acting in breach of duty

    • Or at the least, should have asked the other directors to confirm validity of transaction

  • Thus party cannot rely on ostensible authority where he is on notice of lack of authority