Bank’s local relationship manager had no apparent authority to write off borrower debts

The law on actual and apparent authority is well-established but a recent High Court case has once again highlighted the importance of ensuring that the person you are dealing with has the necessary authority to act.

In Stavrinides and others v Bank of Cyprus plc [2019] EWHC 1328 (Ch), the High Court had to consider whether a bank’s local relationship manager had apparent authority to write off the debts of the borrowers.

In this case, applying the existing law to the facts, it was ultimately decided that the relationship manager did not have actual or apparent authority to write off the borrowers’ significant debts. The bank was, therefore, not bound by a letter purporting to do so, which had been initialled by the relationship manager.

Factors which the Court took into account were as follows: –

  • The bank had not made any representation that the relationship manager had the authority to write off debts of any scale. In fact, the bank’s 10 year history of dealing with the borrowers demonstrated that the bank’s employees had restricted authority and any significant decisions had to be referred to the bank’s general manager.
  • Even if the bank had made such a representation, it would have been unreasonable for the borrowers to rely on it as they were fully aware of the bank’s approval processes and admitted that the relationship manager had never dealt with their loan facility before. The nature and terms of the letter were also taken into account in that it was extraordinary that a local relationship manager would have the requisite authority to write off £3 million of secured debts; that alone was enough to put the borrowers on notice of a lack of authority.

The decision serves to remind us that if there are ever any suspicions about an agent’s authority (for example if there has been a deviation from previous practice, or the transaction is of a significant nature), then it is advisable to request proof of authority from the principal.

To discuss the points raised in this article, contact BHW’s corporate team on 0116 289 7000 or email

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