The claimant, Roy Hammond, sought damages of £973,264 arising out of the repudiation of a contract to provide central heating and plumbing services to the 130 cottages and other properties on the Glynde Estate in East Sussex, of which the first three defendants were trustees and the fourth defendant was land agent. The contract had been signed by the fourth defendant's assistant, who was also a fellow member with the claimant of a pub darts team on the estate. The contract provided for leasing arrangements in respect of central heating systems and for a payment upon termination of the contract of a sum in excess of the installation costs of the systems, regardless of the amount already paid under the leases. *Full details of case:Roy Hammond vs (1) Nicholas Wellard Smith (2) Nicholas John Elliot Sealy (3) Sarah Blanche Mills (4) Right Honourable Viscount Hampden, 24 March 2003, High Court, Chancery Division, Judgment of N Strauss QC
The court directed the trial of three preliminary issues, namely whether the fourth defendant instructed his assistant to sign the contract on behalf of the first, second and third defendants, and if so, whether he had actual or ostensible authority to do so.

Reference

The deputy judge decided that the fourth defendant would not have authorised his assistant to sign a contract of such magnitude without consulting his professional advisers and informing the first to third defendants, and that this led to the inescapable conclusion that the contract was a scheme to defraud the estate. He also decided that the claimant could not rely upon any representation by the fourth defendant as to his own authority, since the terms of the contract were so onerous as to put the claimant on enquiry.

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Postscript

There is a warning here for contractors to beware of putting forward onerous contracts to mates in positions of responsibility in large clients on the assumption that they will be put in the back drawer (or, in this case, the safe) and forgotten about, and the proceeds milked out gradually through standing orders signed at intervals. An agent can only bind his principal if he has the necessary authority to do so, and if, as here, the apparent principal is himself only an agent, then the contractor risks appearing dishonest in the eyes of the law if he enters into a contract on excessively favourable terms through the agency of his mate. As for the principals themselves, perhaps the exploits of Mr Nick Leeson at Barings should by now have encouraged clarity in setting the limits of delegated authority.