Court Of Appeal Finds PSP Liable For Deceitful Representations Made By Agent Acting With Apparent/ostensible Authority

The decision highlights how a principal's conduct can lead a third party to reasonably believe that an agent has ostensible authority.

The Court of Appeal has partially upheld a High Court decision to grant summary judgment in favour of a foreign exchange (FX) broker in its claim against a payment services provider (PSP) for failing to honour a series of FX contracts, finding the PSP liable for deceitful representations made by its agent, who was acting with the PSP's apparent/ostensible authority: Giwa v JNFX Ltd & Ors [2025] EWCA Civ 961.

The decision is the latest in a line of cases addressing the scope and effect of apparent/ostensible authority (see our previous blog posts here). It will be of interest to financial institutions as it illustrates the enforceability of financial contracts executed by agents who may lack actual authority, but who appear to third parties to have the power to bind their principal. It reaffirms the principle in Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 that ostensible authority - which can bind a principal to contracts entered by an agent - requires a representation by the principal, not merely by the agent. The most common form of such a representation is by conduct, such as permitting the agent to act in the conduct of the principal's business with third parties.

The decision highlights how a principal's conduct through allowing an agent to negotiate, communicate, and conclude transactions over a period, can lead a third party to reasonably believe that the agent has ostensible authority. On the facts of the present case, the relevant conduct included the principal's directors failing to object to or clarify the agent's authority when copied to email correspondence relating to the transactions (in particular, where the agent was using the principal's email address and signed himself off as "Head of Global Markets"). The purported title of the agent's role is a factor that the court has found to be relevant in other recent ostensible authority cases (for example, in Vegesentials Ltd & Anor v Shanghai Commercial & Savings Bank Ltd [2024] EWHC 7 (Ch) – see our blog post). Importantly, the decision underlines that disclaimers in email footers purporting to limit an agent's authority are unlikely to be effective, where a third party seeks and obtains explicit confirmation from the principal.

While this case is unusual on the facts (given the overwhelming evidence of the agent's dishonesty, the fact that the principal was copied to the relevant emails, plus the directors of the principal providing separate affirmation of the business relationship), the principles applied are more broadly applicable in a financial services context, particularly around the limitation of authority.

We consider the decision in more detail below.

Background

Between 2020 and 2021, a Nigerian FX broker arranged ten FX transactions on behalf of an African media company (MultiChoice) with a UK regulated PSP (JNFX), converting large sums of Nigerian Naira into US dollars. The FX broker dealt with Mr Mervyn, who held himself out as JNFX's Head of Global Markets. In summary, MultiChoice transferred Naira to the FX broker's companies, which was transferred to accounts designated by Mr Mervyn, and US dollars were then transferred to MultiChoice's London bank account (sometimes from accounts in the name of JNFX and sometimes from accounts in the name of other companies). The first couple of transactions were completed successfully, but subsequent trades faced shortfalls or delays. By the tenth transaction, 7.9 billion Naira had been paid for by MultiChoice, for which no corresponding US dollars had been received.

The FX broker took an assignment of MultiChoice's claims and commenced proceedings against JNFX, Mr Mervyn and others. The FX broker applied for summary judgment against JNFX, alleging that: (i) Mr Mervyn made fraudulent representations about the use of the Naira funds and the delivery of the dollars; and (ii) JNFX was liable for Mr Mervyn's conduct under the doctrine of ostensible authority.

At first instance, the High Court granted summary judgment for the full amount claimed, finding there was no realistic prospect of JNFX defending the claim. The High Court held that JNFX was liable for deceitful representations made by Mr Mervyn, on the basis that Mr Mervyn was acting with (at least) the ostensible authority in the relevant transactions. JNFX appealed.

Decision

The Court of Appeal allowed the appeal in relation to contracts 1-9, holding that the issues raised required fuller factual investigation and cross-examination at trial. However, it upheld the order for summary judgment in respect of the tenth FX contract.

Before considering the grounds of appeal, the Court of Appeal summarised the legal principles applicable to an application for summary judgment under CPR 24, as per Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch), which were not in dispute. The question is always whether it has been shown by the applicant that there is no real prospect of success in the defence (or claim),and for this purpose it is necessary for the court to examine the evidence, while avoiding a mini-trial on the facts. The key aspects of the decision which will be of interest to financial institutions are set out below.

The representations

The FX broker's deceit claim relied on Mr Mervyn having made two false representations. No challenge was made in respect of the High Court's conclusion that the second representation was made, which was as follows: that Mr Mervyn intended to procure the payment by JNFX to MultiChoice's London account of all dollars due under the contracts (the Payment Representation).

The Court of Appeal agreed that the High Court was justified in concluding that the Payment Representation in relation to the tenth contract was false. In the view of the Court of Appeal, the suggestion that Mr Mervyn might have honestly intended the contract to be fulfilled, but ran into unexpected difficulties, seemed fanciful. However, the position was not necessarily the same for the earlier contracts.

In respect of the tenth contract, the Court of Appeal also dismissed JNFX's appeal on reliance, finding there was an obvious inference that the FX broker only transferred the Naira under the tenth contract because of Mr Mervyn's representation that the US dollars would be paid.

Apparent/ostensible authority

The Court of Appeal went on to consider whether JNFX was liable for the Payment Representation in respect of the tenth contract, on the basis that Mr Mervyn had ostensible authority to enter the FX contracts on behalf of JNFX.

Representation by conduct

As its starting point, the court noted that the documentary evidence clearly showed that Mr Mervyn held himself out as authorised to act for JNFX, and the FX broker entered the transaction on that basis. In particular, Mr Mervyn used JNFX's email address, wrote letters to MultiChoice on JNFX headed notepaper and signed off his emails/letters as JNFX's Head of Global Markets.

However, the court acknowledged that ostensible authority requires a representation not just by the agent (they cannot confer authority on themselves) but by the principal. Referring to Freeman, the court highlighted that the most common form of representation by the principal is by conduct, ie by permitting the agent to act in some way in the conduct of the principal's business with other persons.

In the present case, JNFX's directors had permitted Mr Mervyn to present himself as authorised to conduct business with clients such as MultiChoice. This was evidenced by the fact that the directors were copied on various communications between Mr Mervyn and the FX broker, and did not object that Mr Mervyn was acting without authority. In the Court of Appeal's view, JNFX's directors went well beyond just allowing Mr Mervyn to transact business ostensibly on behalf of JNFX. The directors even gave direct confirmations to the FX broker confirming their commitment to the business relationship (the Court of Appeal noted that although this wasafter the Payment Representation was made, it was confirmation of what was apparent from earlier emails).

Knowledge of limits of agent's authority

Next, the Court of Appeal considered and rejected the suggestion that the FX broker could not rely on the principle of ostensible authority on the basis that he knew that Mr Mervyn's authority was limited.

The Court of Appeal acknowledged that, as per Armagas Ltd v Mundogas (The Ocean Frost) [1985] UKHL 11, ostensible authority cannot arise where the contractor knows that the agent's authority is limited so to exclude entering transactions of the type in question. In the present case, there was an email footer at the bottom of Mr Mervyn's emails purporting to limit his authority:

"JNFX Ltd makes no warranty or representation as to the accuracy or completeness of any information and does not assume whatever commitment hereby. This material is by a representative of JNFX Ltd and is for information purposes only for market counterparties or intermediate customers and should not be construed as a solicitation or offer to buy or sell any financial related products. Legally binding obligation can only arise for, or be entered into on behalf of, JNFX Ltd by means of a written instrument signed by a duly authorised representative."

The Court of Appeal observed that the footer was in grey text, small font and not easy to read. It could not be assumed that the FX broker ever read the footer or could be said to have known that Mr Mervyn had no authority to enter into the transactions. Even if the limitation in the email footer applied, there were potential arguments as to whether Mr Mervyn could commit JNFX to contracts such as the tenth MultiChoice contract.

However, the Court of Appeal noted that the FX broker did not solely rely on Mr Mervyn's representations; instead, he sought and obtained explicit confirmation from one of JNFX's directors. JNFX's directors had undoubted authority – almost certainly actual, but at least ostensible – to commit JNFX and to waive any formalities in doing so. The court firmly rejected the suggestion that all JNFX's directors were doing by their email confirmations was to commit JNFX to make onward payment of dollars if and when received from Mr Mervyn. This was, in the court's view, an impossible reading of the emails, which must be read as a reasonable objective reader would read them.

Reasonable enquiries

The court also considered and rejected the suggestion that, as per Philipp v Barclays Bank UK plc [2023] UKSC 25(see our blog post), the broker could not rely on the apparent authority of Mr Mervyn as he failed to make the enquiries that a reasonable person would have made in all the circumstances to verify that Mr Mervyn had that authority.

The court emphasised that the principle in Philipp only applies if the third party has reason to believe that the agent is acting without authority.

In the present case, the broker had no reason to doubt Mr Mervn's authority, particularly as JNFX had honoured earlier contracts. Even if that assumption was mistaken and further enquiries were required, the broker had taken reasonable steps by seeking and obtaining confirmation from one of JNFX's directors.

Accordingly, the court found that JNFX had no realistic prospect of disputing that Mr Mervyn had ostensible authority to enter the FX contracts on its behalf. JNFX was therefore liable for the deceitful Payment Representation made by Mr Mervyn in respect of the tenth contract

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