In the scenario where a senior employee enters into an agreement resolving a grievance of employees, on what basis did the labour appeal court recently hold that such employer is estopped from denying the authority of such senior employee to enter into such agreement? And, what role does the conduct of the agent play, on the one hand (i.e. the senior employee), and, on the other hand, what role does the conduct of the principal play (i.e. the senior employee’s superior)?
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In Western Platinum Ltd v National Union of Mineworkers (2020) 31 SALLR 141 (LAC), the following principles were identified:
- actual authority may be express or implied. It is express when it is given by express words, such as when a board of directors pass a resolution which authorises two of their number to sign cheques. It is implied when it is inferred from the conduct of the parties and the circumstances of the case, such as when the board of directors appoint one of their number to be managing director. They thereby impliedly authorise him to do all such things as fall within the usual scope of that office. Actual authority, express or implied, is binding as between the company and the agent, and also as between the company and others, whether they are within the company or outside it
- ostensible or apparent authority is the authority of an agent as it appears to others. It often coincides with actual authority. Thus, when the board appoints one of their members to be managing director, they invest him not only with implied authority, but also with ostensible authority to do all such things as falling within the scope of that office. Other people who see him acting as managing director are entitled to assume that he has the usual authority of a managing director. But sometimes ostensible authority exceeds actual authority. For instance, when the board appoints the managing director, they may expressly limit his authority by saying he is not to order goods worth more than R500 without the sanction of the board. In that case his actual authority is subject to the R500 limitation, but his ostensible authority includes all the usual authority of a managing director. The company is bound by his ostensible authority in his dealings with those who do not know of the limitation. He may himself do the ‘holding-out’. Thus, if he orders goods worth R1 000 and signs himself ‘Managing Director for and on behalf of the company’, the company is bound to the other party who does not know of the R500 limitation…’ (see South African Broadcasting Corporation v Coop and Others [2006] 1 All SA 333 (SCA); Makate v Vodacom (Pty) Ltd 2016 (4) SA 121 (CC); 2016 (6) BCLR 709 (CC))
- in South African Eagle Insurance Co Ltd v NBS Bank Ltd [2002] 2 All SA 220 (SCA), the court held that, when one of the parties to a contract purports to be acting in a representative capacity but has, in fact, no authority to do so, the person whom he or she purports to represent can obviously not be held bound to the contract. The principal will only be held bound if his or her own conduct justified the other party’s belief that authority existed
- the conduct of the principal plays a crucial role in determining whether it ratified its agent’s action. This was much the case in NBS Bank Ltd v Cape Produce Co (Pty) Ltd [2002] 2 All SA 262 (SCA), at paragraph [25], where the court held that ostensible authority flows from the appearances of authority created by the principal
- actual authority may be important in sketching the framework of the image presented, but the overall impression created is crucial. The court further held that our law has borrowed an expression, estoppel, to describe a situation where a principal may be held accountable when he has created an impression in another’s mind, even though he may not have intended to do so and even though the impression that this agent was acting on its behalf was in fact wrong. Where a principal is held liable because of the ostensible authority of an agent, agency by estoppel is said to arise. But the law stresses that the appearance, the representation, must have been created by the principal himself. The fact that another holds himself out as his agent cannot, of itself, impose liability on the principal
