England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY
HHJ Purle QC (sitting as a Judge of the High Court)
[2017] EWHC 3748 (Ch)

		Royal Courts of Justice Strand, London, WC2A 2LL
		15/11/2018

Sir Terence Etherton MR, Lord Justice Flaux and Mrs Justice Carr:

Introduction

1. This is an appeal from the order dated 7 February 2018 of HHJ Purle QC awarding damages of £531,803.98 against the appellant, Mr James Winter, for vicarious liability for fraudulent misrepresentations made to the respondent, Hockley Mint, by Mr Brian Ramsden.

Factual background

2. The factual background is set out in detail in two judgments of the Judge handed down on 30 November 2017 ([2017] EWHC 3748 (Ch)) and 11 January 2018 ([2018] EWHC 846 (Ch)) respectively. The following summary, which we gratefully take from the two judgments, is sufficient to understand the context of the appeal.
3. Hockley Mint operated a business that dealt in gold and silver jewellery. Its postage costs were substantial, amounting to some £200,000 for 2015. Hockley Mint was keen to reduce its postage costs where possible. It had previously leased postal equipment through a Mr Smith in an effort to make its postal processes faster and cheaper.
4. In April 2015 Mr Smith introduced Mr Ramsden to two of Hockley Mint's representatives, Mr Wroe, who was the Managing Director, and Mrs Campbell, the Accounts Manager.
5. At a meeting in April 2015 Mr Ramsden presented Mr Wroe and Mrs Campbell with a proposal under which Hockley Mint would make substantial savings on postage by entering into agreements to lease further postal and office equipment from a third party supplier. The net saving was to be achieved by Hockley Mint receiving "postage credit" that would exceed the cost of leasing the equipment. Hockley Mint was under the impression that those credits were ultimately to be paid by Royal Mail to a consortium of companies under the control of Mr Ramsden, and the savings passed on to Hockley Mint.
6. Hockley Mint entered into five lease agreements on this basis. Three of them were with Bank Paribas. The tri-partite transactions, of which the three lease agreements with BNP Paribas form part, have been referred to below and before us as BNP 1, BNP 2 and BNP 3. The equipment was supplied by Mr Winter trading as Erskine Hathaway. The equipment was sold by Erskine Hathaway to BNP Paribas, which then leased it to Hockley Mint. Erskine Hathaway paid rebates to Hockley Mint out of the profit from the sale to BNP Paribas. Mr Ramsden negotiated the terms of the tri-partite transactions on behalf of Erskine Hathaway. Mr Ramsden dishonestly represented to Hockley Mint that the rebates were postage credits ultimately paid by Royal Mail and would be paid during the entire period of the lease.
7. Mr Ramsden procured Hockley Mint to enter into two subsequent lease transactions with Tower Leasing Limited and GRENKE Leasing Limited, but they are not the subject of this appeal.
8. As to BNP 1, the lease agreement committed Hockley Mint to paying £8,750 per quarter (£35,000 per year) for 39 months to lease equipment. Mr Ramsden represented this as producing a saving for Hockley Mint, as it would receive £50,000 of postage credit in the first 12 months, a net saving of £15,000. The understanding of Hockley Mint was, therefore, that it was paying £35,000 for £50,000 worth of postage. Moreover, the belief of Mr Wroe and Mrs Campbell was that the agreement was an annual one, because it included an annual review of the savings generated (and a promise by Mr Ramsden of further savings to be made), and any unused savings were said by Mr Ramsden to be able to be rolled over into the next year.
9. In fact, no such postage credits existed. Further, under the terms of the tri-partite transaction, Hockley Mint was only guaranteed rebates for the first year of hire but the obligation to make the payments under the lease would continue for a further 27 months.
10. The Judge found that the terms of BNP 1 were agreed in principle at a meeting between Mr Wroe and Mr Ramsden on 29 April 2015. At that stage the agreement in principle was with SJ Sales & Marketing Services, trading as Business Mail, a company ostensibly owned and controlled by Mr Ramsden. On 21 May 2015 Mr Wroe signed the hire agreement with BNP Paribas. By that stage Erskine Hathaway had replaced Business Mail as the supplier. BNP Paribas countersigned the lease agreement on 29 May 2015. Correspondence from Erskine Hathaway to Hockley Mint was sent under the name of Karl Hansen from an Erskine Hathaway email address. This was a pseudonym for Mr Ramsden, on which Mr Winter had insisted in order to distance himself from Mr Ramsden because of a belief that Mr Ramsden had something of an unsavoury reputation.
11. Hockley Mint entered into BNP 2 on similar terms in early June 2015. Erskine Hathaway was again the supplier. It committed Hockley Mint to paying BNP Paribas under the lease agreement £26,250 per quarter (£105,000 per year) for 39 months for further equipment. The deceitful representations of Mr Ramsden as to postal rebates and the belief of Hockley Mint both as to the source of those rebates and the annual renewal were the same as in the case of BNP 1.
12. Hockley Mint entered into BNP 3 in February 2016. BNP Paribas countersigned the lease agreement on 24 February 2016. It committed Hockley Mint to lease payments of £42,343 per quarter (£169,372 per year) for 60 months for further equipment and the redemption of BNP 2. Both Erskine Hathaway and Develop Systems Ltd ("Develop Systems") were named as suppliers. Once again, Hockley Mint believed, as a result of Mr Ramsden's deceitful representations, that the rebates paid to it were from postal credits and that they would exceed what it had to pay under the lease agreement with BNP Paribas.

The proceedings

13. These proceedings were issued on 13 January 2017 by Hockley Mint against several defendants, including Mr Ramsden. Mr Winter was subsequently added as a defendant. The claims against Mr Ramsden and Mr Winter were for damages for deceit and for conspiracy to injure by unlawful means. It was alleged in the particulars of claim that Mr Winter was liable as Mr Ramsden's principal as the representations of Mr Ramsden in connection with BNP 1, BNP 2 and BNP 3 were made within the scope of Mr Ramsden's authority.
14. Mr Winter's defence denied that Mr Ramsden made any false representations to Hockley Mint; and, if he did make any false representations, it was denied that they were made on behalf of Mr Winter or within the scope of Mr Ramsden's authority from Mr Winter. The alleged conspiracy to injure by unlawful means was also denied.
15. Mr Wroe was in due course added as a third party.

The trial

16. The trial was conducted by the Judge in two parts.
17. Mr Ramsden did not give evidence. He was living in Thailand and claimed to be too ill to attend.
18. Two of the defendants who were involved in the Tower Leasing and GRENKE agreements, namely Mr Christopher Bailey and Develop Systems, made a submission of no case to answer.
19. The Judge delivered his judgment of 30 November 2017 in respect of them, and found them liable for deceit and conspiracy.
20. The Judge found that Mr Ramsden's representations as to the existence of fictitious postal savings were intended to create the impression that there would be no net cost to Hockley Mint. For that reason, he held that there was ample evidence on which to conclude that Mr Ramsden had committed a fraud.
21. The Judge held (at [28]) that Mr Wroe and Mrs Campbell had entered into the transactions on behalf of Hockley Mint in reliance on Mr Ramsden's representations.
22. The Judge's subsequent judgment of 11 January 2018 was delivered in respect of the remaining defendants, including Mr Winter, and focused on BNP 1, BNP 2 and BNP 3.
23. The Judge said (at [8]) that, for the reasons that he gave in his earlier judgment, he had no doubt that Mr Ramsden deliberately created the impression that the postal rebates or savings would be ongoing and that the equipment came at no cost whatsoever to Hockley Mint. He said (at [11]) that, for the reasons he gave in his earlier judgment, he found that Mr Ramsden was guilty of fraudulent misrepresentations and that Hockley Mint was taken in by the deceit that was practised upon them, namely that the goods in question would be at no cost to them because of the postal savings that Mr Ramsden could achieve; whereas, in fact, the rebates, which were not properly documented anywhere, were only short-term – for the first year of the agreement – and exposed Hockley Mint to liability running into hundreds of thousands of pounds. He added (at [12]) that, moreover, a large part of the equipment that Hockley Mint was acquiring through the lease agreements was not needed.
24. The Judge held (at [26]) that Mr Winter was not a party to Mr Ramsden's fraud but was merely an innocent supplier who had entered into a good deal with Mr Ramsden. In coming to this conclusion, the Judge (at [31]) placed emphasis on the fact that Mr Winter did in fact acquire and deliver equipment to Hockley Mint, fulfilling his end of the bargain, by contrast with the failure of Mr Bailey and Develop Systems to deliver any equipment.
25. The Judge stated (at [39]) that Mr Ramsden was an agent, and (at [40]) that Mr Winter had put Mr Ramsden in the position of doing what Mr Ramsden was authorised to do in each case, namely to enter into BNP 1, BNP 2 and BNP 3 and to finalise arrangements for cash discounts.
26. The Judge referred to Armagas Ltd v Mundogas SA [1986] 1 AC 717 and Lister v Hesley Hall [2001] UKHL 22, [2002] 1 AC 215 and considered (at [38], [43] and [46]) that they suggested that at least one of the relevant tests is whether it is just and fair for liability to be imposed on the principal for the wrongdoing of the agent.
27. The Judge then referred to Dubai Aluminium Co Ltd v Salaam [2002] UKHL 48, [2003] 2 AC 366 and said (at [49]) that it confirmed that the relevant test for a principal's vicarious liability for the intentional torts of the agent is whether there is a sufficiently close connection between the agent's wrongdoing and the class of acts which the agent was employed to perform.
28. The Judge considered (at [50]-[52]) that, even though Mr Winter had insisted on Mr Ramsden using the pseudonym of Karl Hansen in his dealings with Hockley Mint, this did not make good the case of fraud against Mr Winter personally but it did emphasise the importance of Mr Ramsden, whatever hat he was wearing and under whichever name he was operating, to Mr Winter's organisation.
29. The Judge said (at [50] and [53]) that the representations made by Mr Ramsden about postal savings were an integral part of his selling technique and of the selling process. He concluded (at [54]) that Mr Winter was vicariously liable for Mr Ramsden's deceit.
30. The remainder of the judgment dealt with quantum at [68]-[77], and peripheral matters unrelated to this appeal [77]-[93].

The appeal

The grounds of appeal

31. There are four grounds of appeal. They may be summarised as follows: (1) the Judge applied the wrong legal test in determining that Mr Winter was vicariously liable for the deceit of Mr Ramsden, and should have applied the test that a principal is only liable for the fraudulent misrepresentations of his or her agent where those misrepresentations were made within the scope of the agent's actual or apparent authority; (2) if the Judge had applied the law to the facts correctly, he could not properly have concluded that Mr Ramsden had authority to make representations on behalf of Mr Winter; (3) if the Judge had applied the law to the facts correctly, he could not properly have concluded that Hockley Mint relied upon any representation by Mr Winter as to Mr Ramsden's authority to make representations on Mr Winter's behalf; and (4) if Hockley Mint did rely upon any representation as to Mr Ramsden's authority to make representations on behalf of Mr Winter, such reliance was irrational and/involved Hockley Mint turning a blind eye to obvious grounds for suspicion concerning Mr Ramsden's apparent authority. Permission to appeal was given by Henderson LJ on the first three grounds but not the fourth.
32. Mr Winter applies for permission to raise two further grounds of appeal.
33. He wishes to argue that, to the extent that the Judge found that Mr Ramsden made the fraudulent misrepresentations within the scope of his actual authority from Mr Winter, that decision was wrong. He also wishes to argue that, if it is determined, contrary to the first ground of appeal, that a case of agency such as the present case is to be analysed pursuant to a unitary modern law of vicarious liability in all cases, as set out in the judgment of Lord Phillips in Various Claimants v Catholic Child Welfare Society [2012] UKSC 56, [2013] 2 AC 1, as it was interpreted by Lord Reed in Cox v Ministry of Justice [2016] UKSC 10, [2016] AC 660, at [24, the Judge's decision was wrong because the requisite two stage test is not satisfied in the circumstances of this case.

The respondent's notice

34. Hockley Mint has issued a respondent's notice seeking to uphold the Judge's order on the additional ground that he ought to have found Mr Winter directly liable to Hockley Mint in deceit and unlawful means conspiracy.

Discussion

The grounds of appeal

35. The critical issue raised by the first ground of appeal is whether the Judge applied the correct legal test in reaching his conclusion that Mr Winter is vicariously liable for Mr Ramsden's deception of Hockley Mint.
36. Lloyd v Grace, Smith & Co [1912] AC 716 concerned the liability of the defendant firm of solicitors for the conveyancing fraud of their managing clerk, who conducted the conveyancing business of the firm without supervision. One of the issues was whether it was a defence that the fraud was committed, not for the benefit of the firm, but for the benefit of the managing clerk. The firm contended that Barwick v English Joint Stock Bank (1867) LR 2 EX 259 was authority for the proposition that a principal was not liable for the fraud of his agent unless the fraud was committed for the benefit of the principal.
37. Lord Macnaghten, with whose speech Earl Loreburn and Lord Atkinson agreed, said (at 735-6) that the true principle to be derived from Barwick was that an innocent principal was civilly responsible for the fraud of his authorised agent, acting within his authority, to the same extent as if it was his own fraud. Lord Macnaghten did not consider separately actual authority, on the one hand, and apparent or ostensible authority, on the other hand. He said (at 736), for example, that the expressions "acting within his authority", "acting in the course of his employment", and "acting within the scope of his agency" meant one and the same thing, and that it was not easy to define with exactitude what was meant by those expressions. This reflects the fact that the case was decided at an early stage in the development of the jurisprudence on ostensible authority and on the difference between actual authority, on the one hand, and ostensible authority, on the other hand, as was described much later in Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480, esp at 502-3 (Diplock LJ).
38. Plainly, if the express terms on which Mr Ramsden was authorised to act for Erskine Hathaway implicitly authorised him to negotiate and conclude the tri-partite transactions with Hockley Mint and BNP on terms that rebates to Hockley Mint were to be postal rebates originating with Royal Mail and were to equal or exceed Hockley Mint's financial liabilities under the leasing agreements, then Mr Winter is liable to Hockley Mint on the basis of Mr Ramsden's express authority.
39. There is a dispute between the parties as to whether the Judge found that Mr Winter conferred such express authority on Mr Ramsden. Mr Mohammed Zaman QC, for Hockley Mint, submitted that the Judge found that Mr Ramsden was given such express authority by Mr Winter. Mr Kevin Pettican, counsel for Mr Winter, submitted that the Judge found that there was no such express authority.
40. Mr Zaman relied upon the Judge's findings (in [39], [40] and [54]) that Mr Ramsden did what he was expressly authorised to do, namely to enter into BNP 1, BNP 2 and BNP 3 and to finalise arrangements for the rebates and that he was carrying out those authorised activities in the way he saw fit.
41. The problem with that analysis is that the Judge expressly stated (at [41]) that Mr Ramsden did not have authority to commit a fraud.
42. On the other hand, the Judge also stated (at [41]) that, as Mr Ramsden had authority to finalise the three transactions and that authority had been confirmed by Mr Winter, Mr Winter would be liable for any representation made in the course of finalising the transactions.
43. The resolution of the issue of Mr Ramsden's express authority would appear to depend on whether or not the Judge found that Mr Ramsden was expressly authorised to enter into any agreement with Hockley Mint he chose provided it involved a sale of equipment to BNP, the hiring of that equipment to Hockley Mint and the securing of enough profit to Mr Winter, trading as Erskine Hathaway, to make the transaction financially worthwhile to Mr Winter even after payment of rebates to Hockley Mint out of that profit.
44. With some hesitation, we conclude that the Judge did not make such a finding. Rather, he found that Mr Ramsden was only expressly authorised to enter into transactions that were not procured by fraud.
45. Any other interpretation of the judgment would leave unexplained why the Judge did not stop at paragraph [40] of his judgment, which directly addressed the issue of actual authority, and why he proceeded to consider in paragraphs [41] to [54] a string of cases all of which were concerned with the vicarious liability of a principal or an employer for reasons other than actual authority, namely Armagas Ltd v Mundogas SA [1986] AC 717, Lister v Hesley Hall Ltd [2002] 1 AC 215 and Dubai Aluminium Co Ltd v Salaam [2002] UKHL 48. We comment on those cases below.
46. On one view, the respondent's notice amounts to a claim that the Judge ought to have found for Hockley Mint on the basis of Mr Ramsden's express authority. We address the respondent's notice below.
47. We turn, therefore, to the question in the first ground of appeal - whether the Judge applied the wrong legal test in determining that Mr Winter is vicariously liable for Mr Ramsden's deceit. In our view, the Judge plainly did.
48. Armagas is binding authority of the House of Lords that, where a claimant has suffered loss in reliance on the deceit of an agent, the principal is vicariously liable if, but only if, the deceitful conduct of the agent was within his or her actual or ostensible authority.
49. That case concerned the sale of a ship by Mundogas to Armagas. The negotiations were conducted between Mr Magelssen on behalf of Mundogas and Mr Johannesen on behalf of Armagas. Armagas was only prepared to purchase the ship on the basis that Mundogas entered into a three-year charterparty. In return for a bribe offered by Mr Johannesen, Mr Magelssen agreed to a three-year charterparty when he was in fact only authorised to enter into one-year charterparties. Mr Magelssen made a fraudulent representation to Armagas to the effect that he had acquired specific authorisation from Mundogas to enter into a three-year charterparty. It was held by the House of Lords, dismissing the appeal from the Court of Appeal, that Mundogas was not bound by the terms of the three-year charterparty and that it was not vicariously liable to Armagas for Mr Magelssen's deceit.
50. In the Court of Appeal, Robert Goff LJ explained the policy reason for treating fraud differently from other types of wrongdoing in the context of the vicarious liability of a principal. He said as follows (at 738C/D and 79F-740A):

"In cases of fraud at least, involving as they do a representation by the servant in reliance upon which the third party has acted to his detriment, the master can only be vicariously liable for the servant's fraud where he has acted within his ostensible authority. If this were not the law, in many cases where the servant has warranted his authority, fraudulently or even negligently, the master would be vicariously liable for the tort; there is no trace in the authorities of this being so. …"

"This approach can moreover, in my judgment, be justified as a matter of policy. For where the servant's wrong consists of a misrepresentation upon which the plaintiff relies, if that misrepresentation is not within the ostensible authority of the servant, the plaintiff is placing reliance on a statement by the servant which, as I have already indicated, either does not fall within the class of acts which a person in his position is usually authorised to perform, or is a statement made in circumstances where the plaintiff has notice that his authority is limited. In either case, in my judgment, the plaintiff is placing his reliance exclusively upon the servant; and it is understandable that it should be the policy of the law in those circumstances, not merely that the unauthorised act should not be imputed to the master, but also that the master should not be vicariously liable for the servant's wrong."

"On this basis, those torts which involve reliance by the plaintiff upon a representation by the servant should be distinguished from other wrongs, for example those which involve intentional or negligent physical acts by the servant. In the latter class of case, the ostensible authority of the servant does not provide the criterion of the master's vicarious liability: see, in particular, Bugge v. Brown (1919) 26 C.L.R. 110 , 116, et seq., per Isaacs J. and, at p. 132, per Higgins J."

51. Furthermore, as Stephenson LJ pointed out, if Mundogas' liability was not limited by the extent or scope of Mr Magelssen's authority, the odd situation would result that Mundogas might have been liable for any damage caused to Armagas by his fraud, though not liable to perform the contract which the fraud induced or to pay Armagas damages for breach of contract.
52. Lord Keith gave the leading speech in the House of Lords, with which all the other members of the judicial committee agreed. He distinguished, in the context of vicarious liability, dishonest conduct from other misconduct. He said (at 780F) that the question of ostensible authority in the contractual field is closely intertwined with that of vicarious liability for the fraud of a servant. He said (at 780G) that it is well settled that a master is not liable for the dishonest tort of his servant merely because the latter's employment has given him the opportunity to commit it. He said (at p.781E/F) that the essential feature for creating liability in the employer is that the party contracting with the fraudulent servant should have altered his position to his detriment in reliance on the belief that the servant's activities were within his authority, this belief having been induced by the master's representations by way of words or conduct. The core of his reasoning and decision is to be found in the following statements in his speech (at 782E, 782H-783B):

"This dictum [of Denning LJ in Navarro v Moregrand Ltd [1951] 2 TLR 674, 680] which was not concurred in by the other two members of the Court of Appeal, may have some validity in relation to torts other than those concerned with fraudulent misrepresentation, but in my opinion it has no application to torts of the latter kind, where the essence of the employer's liability is reliance by the injured party on actual or ostensible authority. … At the end of the day the question is whether the circumstances under which a servant has made the fraudulent misrepresentation which has caused loss to an innocent party contracting with him are such as to make it just for the employer to bear the loss. Such circumstances exist where the employer by words or conduct has induced the injured party to believe that the servant was acting in the lawful course of the employer's business. They do not exist where such belief, although it is present, has been brought about through misguided reliance on the servant himself, when the servant is not authorised to do what he is purporting to do, when what he is purporting to do is not within the class of acts that an employee in his position is usually authorised to do, and when the employer has done nothing to represent that he is authorised to do it."

53. Lord Keith held (at 783C) that Mr Magelssen was not authorised to enter into the three-year charterparty, to do so was not within the usual authority of an employee holding his position, and Armagas knew it, and Mundogas had done nothing to represent that he was authorised to do so. Accordingly, Lord Keith, concluded (at 783E) that Mundogas was not vicariously liable for Mr Magelssen's deceit.
54. The Judge appears to have extracted from the Armagas case a much wider principle based upon Lord Keith's statement (at 782H) quoted above that, "[at] the end of the day the question is whether the circumstances under which a servant has made the fraudulent misrepresentation which has caused loss to an innocent party contracting with him are such as to make it just for the employer to bear the loss."
55. Adopting that approach, the Judge said (at [43]) that it is just and fair for liability to be imposed upon Mr Ramsden's principal, Mr Winter, in all the circumstances of the case since Mr Winter, by authorising Mr Ramsden to enter into BNP 1, BNP 2 and BNP 3 and to finalise arrangements for cash discounts, had put Mr Ramsden in a position where he could commit the wrong.
56. The next stage of the Judge's analysis was to refer to Lord Steyn's speech in Lister. In that case the House of Lords held that the defendant, which owned and managed a school, was vicariously liable for the systematic sexual abuse of the claimants by the warden of a boarding house attached to the school. The Judge (at [45]) referred to Lord Steyn's description (at [20]) of the test laid down in Salmond, Law of Torts, 1^st ed (1907) and Salmond & Heuston on the Law of Torts, 21st ed, as (1) deeming to fall within the course of employment " a wrongful and unauthorised mode of doing some act authorised by the master" and (2) emphasising the connection between the authorised acts and the "improper modes" of doing them. Lord Steyn said that Salmond's test was "[i]n reality simply a practical test serving as a dividing line between cases where it is or is not just to impose vicarious liability". The Judge said (at [46]) that such a test:

"reflects what I have divined to be the closest I can get to the ratio in Armagas …"

57. The Judge then referred to Dubai Aluminium. One of the issues in the House of Lords in that case was whether the innocent partners of another partner, who was assumed to have dishonestly and knowingly assisted in the fraudulent scheme of his client by drafting agreements and giving other assistance, were vicariously liable to the claimant victim of the fraud. That turned on the application of section 10 of the Partnership Act 1890, which provides that a partnership firm is liable for loss or injury caused to a third party as a result of any wrongful act or omission of any partner "acting in the ordinary course of the business of the firm" or with the authority of his co-partners. It was held that the innocent partners were vicariously liable pursuant to section 10 because, although not authorised by his co-partners, the culpable partner's assistance in the fraudulent scheme was so closely connected with what he was authorised to do that he could fairly and properly be regarded as having acted in the ordinary course of the firm's business.
58. The leading speeches were given by Lord Nicholls and Lord Millett. Lord Nicholls said as follows (at [22]) about the expression "ordinary course of business":

"23. … Lord Denning MR once said that on this question the cases are baffling: see Morris v C W Martin & Sons Ltd [1966] 1 QB 716, 724. Perhaps the best general answer is that the wrongful conduct must be so closely connected with acts the partner or employee was authorised to do that, for the purpose of the liability of the firm or the employer to third parties, the wrongful conduct may fairly and properly be regarded as done by the partner while acting in the ordinary course of the firm's business or the employee's employment…"

59. Lord Millett said:

"122. The vicarious liability of an employer does not depend upon the employee's authority to do the particular act which constitutes the wrong. It is sufficient if the employee is authorised to do acts of the kind in question: see Navarro v Moregrand Ltd [1951] 2 TLR 674, 680, per Denning LJ. This is equally true of partners, though it is perhaps less obvious in their case, since the relation between partners is essentially one of agency. An employer may authorise his employee to drive, but he does not authorise him to drive negligently. A firm of solicitors may authorise a partner to draft agreements for a client, but it does not authorise him to draft sham agreements. Lord Lindley wrote "it is obvious that it does not follow from the circumstance that such tort or fraud was not authorised, that therefore the principal is not legally responsible for it" cited in Lindley & Banks on Partnership, 17th ed (1995) , pp 332-333."

"124 … If regard is paid to the closeness of the connection between the employee's wrongdoing and the class of acts which he was employed to perform, or to the underlying rationale of vicarious liability, there is no relevant distinction to be made between performing an act in an improper manner and performing it for an improper purpose or by an improper means. …"

60. The Judge said (at [49]) with reference to paragraph [124] of Lord Millett's speech:

"... that confirms, as do other passages in the same case, that the relevant test which has now emerged is whether there is a sufficiently close connection between the employee or, in this case, the agent's wrongdoing and the class of acts he was employed to perform."

61. The Judge then applied the two approaches he had identified from the cases he cited – whether it is just for the employer to bear the loss, and whether there was a sufficiently close connection between the employee's or agent's wrongdoing and the acts he was employed to perform – to the facts of the present case and concluded that Mr Winter was vicariously liable. The Judge said:

"53. It seems to me that, taking the test as the broad one and looking at the closeness of the connection between Mr Ramsden's authorised activities and the representations he made, they were all an integral part of the same selling process. It is unreal and quite unlike Armagas … to separate the representations which he made about postal savings and the like from the actual selling of the equipment. I cannot do so.

54. Mr Ramsden did not separate those representations from the selling process either, and accordingly, it seems to me, that this case falls on the other side of line from Armagas... Mr Ramsden was carrying out authorised activities in the way he saw fit. He was authorised to enter into and complete the transactions. He must have been authorised also to hold himself out as authorised by Erskine Hathaway, which in fact he was. Mr Winter confirmed in his own evidence that he authorised BNP/1 in May 2015 and also authorised the later transactions as well. He saw nothing wrong with them, as neither did the financiers who financed them. They did not know about the representations that Mr Ramsden was making but Mr Ramsden, whilst not acting for the financiers, was undoubtedly acting for Mr Winter because he was the ultimate supplier. He stood to gain from these transactions and the representations were made as an integral part of the selling process from which the gain derived. In those circumstances, it seems to me right and just that vicarious liability should apply. I accordingly find Mr Winter liable vicariously, though not as a deceiver, in respect of the transactions in question."

62. For completeness, we should record that neither Mr Pettican nor Mr Zaman relied upon anything in Mohamud v Wm Morrison Supermarkets plc [2016] AC 677. We were referred to a number of other cases by Mr Pettican – Kevin So v HSBC Bank plc [2009] 1 WLR 2409, Quinn v CC Automotive Group Ltd [2010] EWCA Civ 1412, Acute Property Development Limited v Apostolou and the Catholic Child Welfare Society case but those cases turned on their own facts and do not provide any further insight into the test applicable in the present case. He also referred to Frederick v Positive Solutions (Financial Services) Limited [2018] EWCA Civ 431, in which Flaux LJ, with whom the other two judges agreed, said (at [76]) that it is well established that merely providing the opportunity for wrongdoing is not sufficient without more to give rise to vicarious liability, absent a holding out of the wrongdoer as having authority to act for the defendant sought to be made vicariously liable. That case is also entirely consistent with the test in Armagas.
63. The analysis of the Judge did not identify or address the essential ingredients of vicarious liability of a principal for the deceit of his agent as required by Armagas: a holding out or representation by the principal to the claimant, intended to be and in fact acted upon by the claimant, that the agent had authority to do what he or she did, including acts falling within the usual scope of the agent's ostensible authority. Instead, he applied a broad principle of fairness and a test of "sufficiently close connection" derived from Lister and Dubai Aluminium. Those cases, however, did not concern a reliance based tort, and were not about the ostensible authority of an agent or employee as a result of a holding out by the principal or employer. They concerned the ordinary course of employment (in Lister) and the ordinary course of a firm's business (in Dubai Aluminium). That is why Armagas was not mentioned in any of the speeches in either case, and why Lord Nicholls in Lister said (at [30]) that in that case and in the other cases he cited there was no question of reliance or holding out, and why Lord Nicholls in Dubai Aluminium said (at [28]) that he left aside cases where the wronged party was defrauded by an employee acting within the scope of his apparent authority. In short, the first ground of appeal is correct in stating that the Judge applied the wrong test.
64. Mr Zaman sought to add a gloss to the Armagas test to the effect that a principal will always be liable for the dishonesty of his or her agent where the agent has acted with the intention of benefiting the principal. In that connection, Mr Zaman emphasised that Mr Winter was intended to benefit and did benefit from BNP 1, BNP 2 and especially BNP 3. He relied on a statement of Lord Keith in Armagas, and a statement of Willes J in Barwick mentioned by Lord Macnaghten in Lloyd and by Lord Millett in Lister, as well as on a further statement by Lord Macnachten in Lloyd about a principal's inability to approbate and reprobate.
65. We do not accept Mr Zaman's gloss. He relied on the following statement of Lord Keith in Armagas (at 780B/C) introducing Lord Keith's analysis of the relevant principles:

"Dishonest conduct perpetrated with no intention of benefiting the employer but solely with that of procuring a personal gain or advantage to the employee is governed, in the field of vicarious liability, by a set of principles and a line of authority of peculiar application."

66. The principle or test laid down in Armagas is to be found at pages 782E and 782H-783B at the end of Lord Keith's analysis, as we have said and set out above. Mr Zaman's gloss does not form part of it. It is in any event clear from the facts of Armagas that the gloss cannot be correct since Mr Magelssen's deceit in that case was for the purpose of securing a sale of his principal's ship in a transaction that potentially would give a substantial profit to his principal but it was nevertheless held that there was no vicarious liability. It seems probable that Lord Keith's words – "[d]ishonest conduct perpetrated with no intention of benefiting the employer but solely with that of procuring a personal gain or advantage of the employee" – in the passage relied upon by Mr Zaman were intended to reflect the facts of Armagas itself since the three-year charterparty (rather than a one-year charterparty) was not to Mundogas' advantage but was procured by Mr Magelssen with deceit in return for the bribe offered to him by Mr Johannesen.
67. In Barwick (at 265) Willes J said that "the master is answerable for every such wrong of the servant or agent as is committed in the course of the service and for the master's benefit, even though no express command or privity of the master be proved". In Lloyd (at 732) Lord Macnaghten said that no objection could be taken to that statement of the law. He then proceeded to say, with reference to the actual facts of Lloyd, that it was a very different proposition to say that the master is not answerable for the wrong of the servant or agent, committed in the course of the service, if it be not committed for the master's benefit.
68. Lord Millett in Lister (at 246) referred to that passage in Lord Macnaghten's speech in Lloyd, and added: "This may be a sufficient condition of liability, but it is not a necessary one."
69. We do not accept that either Lord Macnaghten or Lord Millett was laying down a definitive statement of law that a principal will always be vicariously liable for the wrongdoing of his or her agent where the wrongdoing was committed for the benefit of the principal, regardless of the circumstances and even in cases of deceit. Those were not the facts of either Lloyd or Lister. Furthermore, as we have said, Lloyd was decided at an early stage in the development of the principles of the vicarious liability of a principal for an agent; and in any event the test for the liability of a principal for the deceit of an agent is authoritatively laid down in Armagas, which was decided after Lloyd and was not cited in the speeches or even in argument in Lister.
70. Mr Zaman also relied, for his gloss, on the following statement of Lord Macnaghten in Lloyd (at 738):

"The only difference in my opinion between the case where the principal receives the benefit of the fraud, and the case where he does not, is that in the latter case the principal is liable for the wrong done to the person defrauded by his agent acting within the scope of his agency; in the former case he is liable on that ground and also on the ground that by taking the benefit he has adopted the act of his agent; he cannot approbate and reprobate."

71. Approbation in this context really means ratification of the agent's unauthorised act. That requires knowledge on the part of the principal of all the essential facts. That would amount to actual authority, which the Judge rejected. Furthermore, ratification was not alleged in the particulars of claim, nor was it the basis of the Judge's decision on Hockley Mint's vicarious liability in the present case, nor is it asserted in Hockley Mint's respondent's notice as an additional ground for upholding the judgment on vicarious liability.
72. For his part, Mr Pettican submitted that Mr Ramsden could not have had ostensible authority to enter into the relevant transactions because they were so extraordinary in their nature, involving, as they did, a supplier of equipment apparently offering rebates that would involve the Royal Mail, the apparent effect of which was that the equipment would be supplied at no cost to Hockley Mint and indeed Hockley Mint would itself be paid for the use of the equipment. Mr Pettican referred in this context to statements of Stephenson LJ in the Court of Appeal in Armagas (at 766E/F and 767E) that he found it helpful and more just, in testing the employer's responsibility, to consider how unusual or abnormal the employee's transaction is; that abnormality is always an important circumstance; and that in the Armagas case itself it was decisive.
73. The short answer to this submission of Mr Pettican is that this is not a ground of appeal. In any event, the question is whether Mr Winter held out Mr Ramsden as having authority to enter into the relevant transactions with Hockley Mint and whether Hockley Mint relied upon that holding out. That depends on whether, from the perspective of Hockley Mint, the three transactions in question had the appearance of genuine transactions. For the reasons we give below, we consider that there is evidence capable of supporting the conclusion that there was such a holding out and reliance; and furthermore, we see no reason to think that the transactions did not have the appearance of being genuine. Rebates were in fact paid and they were paid by Mr Winter from the BNP purchase money. Equipment was actually supplied to Hockley Mint pursuant to all three of the BNP Paribas transactions. That was as true of BNP 3, as it was of BNP 1 and BNP 2, albeit that most of the items under that particular transaction replaced equipment that had been supplied previously.
74. Mr Pettican submitted that, in any event, the appeal should be allowed because the Judge had found vicarious liability on the basis of an incorrect test and so the Judge's order for damages and interest should be set aside without any further consequential orders or directions, save in relation to costs. In that connection, he appeared, at least initially, to suggest that it was fatal to Hockley Mint that it had not expressly pleaded a holding out by Mr Winter of Mr Ramsden as having ostensible authority to enter into the relevant transactions. It is not necessary for us to examine the various documents setting out Hockley Mint's case in the course of the proceedings. It is sufficient to say that the Judge found that Mr Winter was vicariously liable for Mr Ramsden's deceit for reasons other than actual authority. No complaint was made to the Judge that he could not do so due to a deficiency in Hockley's Mint's pleaded case; nor is it is a ground of appeal.
75. Mr Pettican then submitted that there is no or insufficient evidence of any holding out of Mr Ramsden by Mr Winter as his agent with ostensible authority to practice the deceit which induced Hockley Mint to enter into the three BNP Paribas transactions. He emphasised that there had been no enquiries as to what Erskine Hathaway was or what Mr Ramsden's relationship with Erskine Hathaway was or as to the extent of Mr Ramsden's authority. Mr Pettican also relied on the fact that Hockley Mint's respondent's notice does not seek to uphold the Judge's decision on the ground of ostensible authority even if the Judge applied the wrong legal test in reaching that decision.
76. We consider that there is material which arguably is capable of supporting a case of vicarious liability on the basis of Mr Ramsden's ostensible authority. The Judge found (at [28]) that Mr Winter gave Mr Ramsden "the contractual documentation" and the right to use "Erskine Hathaway notepaper". The Judge also found (at [50]) that Mr Winter insisted upon Mr Ramsden assuming the fictitious persona of Karl Hansen for the purpose of communications with Hockley Mint on behalf of Erskine Hathaway. He authorised the fictitious Karl Hansen having an Erskine Hathaway email address and monitored the same. The contractual documentation entrusted by Mr Winter to Mr Ramsden was deployed by Mr Ramsden in his negotiations with Hockley Mint to procure the relevant transactions. Erskine Hathaway's notepaper logo was used by Mr Ramsden on emails from the fictitious Karl Hansen to employees of Hockley Mint. Some of those emails confirmed the BNP Paribas transactions concluded by Mr Ramsden with Hockley Mint. Those emails began before Hockley Mint was contractually committed to BNP 1 when BNP signed the leasing agreement on 29 May 2015. Mr Winter authorised the payment to Hockley Mint of the rebates under the three BNP Paribas transactions pursuant to invoices from Hockley Mint which referred to "postage for the quarter" and "savings on postal agreement".
77. Mr Pettican submitted that all those matters are irrelevant since the evidence was clear that Hockley Mint, and in particular its managing director Mr Wroe, thought that Mr Ramsden was Erskine Hathaway and not an agent for someone else. Erskine Hathaway relied, he said, entirely on Mr Ramsden and what he told them.
78. We do not agree with that analysis. This is not a case in which the third party relied solely on the representations of the agent as to his or her authority without any representation or holding out by the principal. The matters in paragraph 76 above emanated from or with the authority of Mr Winter and were intended to lead Hockley Mint to believe, or at any event were objectively capable of leading Hockley Mint to believe, that Mr Ramsden had authority to commit Erskine Hathaway, whoever or whatever that trading entity might be.
79. Mr Pettican initially submitted that it was unfair to Mr Winter to address on the appeal those various items of evidence in support of a case of ostensible authority of Mr Ramsden, particularly when some of that evidence had not been foreshadowed in Hockley Mint's skeleton argument for the appeal or its respondent's notice.
80. Mr Pettican further emphasised that very little was read by Hockley Mint. He said it was important in that context to have regard to the evidence of Mr Wroe and Mrs Campbell, to whom emails from the fictitious Karl Hansen were addressed. Mr Pettican also observed that the contribution claim advanced by Hockley Mint against Mr Wroe in the letter dated 11 September 2017 from Trowers & Hamlins was based on his failure to read or consider properly the implications of the terms on which Hockley Mint was entering into the transactions. The difficulty, however, once again, is that the Judge did not deal with that point because he applied the incorrect test.
81. In the light of all those matters, we consider that the only fair and proper course is to remit for re-hearing the issue as to whether Mr Winter is vicariously liable on the basis of Mr Ramsden's ostensible authority. We do so with reluctance and regret in view of the considerable cost and time involved, which will be exacerbated by the inability to remit it to the Judge, who has sadly died since the conclusion of the trial.
82. Having taken instructions, Mr Pettican sought to persuade us that, due to the very limited means of Mr Winter, we should determine the issue ourselves on the basis of the material before us and other material which would be supplied to us, rather than remit the issue for a further hearing and determination. We do not consider that to be a proper course of action. It would require us to evaluate all the relevant evidence, including some which we have not yet even seen, and to assume the role of a trial court in hotly contested litigation and where the inferences to be drawn from the various items of evidence would doubtless be the subject of considerable argument.
83. We are not precluded from taking the course of action we propose, remitting the issue for determination, by the absence of anything in the respondent's notice seeking to support the Judge's order on the ground of Mr Ramsden's ostensible authority. As we have said, we take the view that the Judge intended to address, and did address, vicarious liability, otherwise than on the ground of actual authority, and we are merely proposing that the issue should be determined in accordance with the correct test rather than the one that he applied.
84. In the circumstances, neither of the two new proposed grounds of appeal arises and we refuse permission for them. Subject to Hockley Mint's respondent's notice, we would dispose of the remaining grounds of appeal by remitting for re-hearing and determination the issue of Mr Winter's vicarious liability on the grounds of Mr Ramsden's ostensible authority.

The respondent's notice

85. As we have said, Hockley Mint seeks to uphold the judgment below on the additional ground that, on the evidence, the Judge ought to have found Mr Winter directly liable in deceit and for unlawful means conspiracy. On the current wording of CPR 52C PD.8(2) and (3) and given the terms of the order below, permission to pursue this ground is not required, since no variation of the order need be sought.
86. The following two submissions are pursued. First, the Judge did not set out a reasoned (or adequately reasoned) judgment on the claim for deceit and unlawful means conspiracy. He failed to complete the necessary task before him, namely to consider, review and assess the evidence fully. He simply commented that Mr Winter had "made a favourable impression on [him] in the witness box….". Second, the evidence was "sufficient" to prove the claim for deceit and unlawful means conspiracy against Mr Winter and the Judge failed to consider the evidence properly. Hockley Mint relies in particular on the following matters in that regard.
87. Mr Winter was instrumental in the creation of the false persona of Karl Hansen for Mr Ramsden, something which he did not do for any other salesperson. The Judge ought to have concluded that Mr Winter knew that he was engaging the services of a fraudster and wanted the benefit of the fraud, without the apparent connection.
88. Mr Winter knew of, and was party to, the fraudulent scheme. He accepted that the Erskine Hathaway proposal was nonsense. That proposal set out the fraudulent nature of the transactions. Mr Winter was directly involved in procuring the finance in advance of each agreement. The invoices for "postage for the quarter" and "savings on postal agreement for the year as agreed", as Mr Winter must have known, were not for any such thing and he paid them. There was no reason for providing the rebate for BNP 1 other than to dupe Hockley Mint. Mr Winter was the real and substantive financial beneficiary of the fraud. The pricing of the Docmail equipment was particularly exaggerated and the rollover of BNP 2 into BNP 3 served no real purpose. BNP 3 made no commercial sense for Hockley Mint, and Mr Winter knew it. The BNP 3 transaction was inexplicable except as a fraud for Mr Winter's benefit. Mr Ramsden himself received no benefit under BNP3 which was the single biggest transaction involving Erskine Hathaway. Under BNP3 Mr Winter supplied exactly the same equipment as had been supplied under BNP2. There could be no honest rationale for the roll-over from BNP2 to BNP3.
89. Hockley Mint also advances the following points. Mr Winter's response to its application for a freezing injunction and his evidence in support of an application for a stay of execution demonstrated his capacity to mislead, something that this court can take into account. The complete absence of any documentary record between Mr Ramsden and Mr Winter raises a proper inference that there was something to hide. Mr Winter was incorrect to claim that Mr Ramsden came to him with the proposals, taking BNP 3 as an example.
90. In his oral submissions before us, Mr Zaman merged the two grounds of attack into an overarching submission that the Judge's findings exonerating Mr Winter of any knowing participation in a fraud were perverse. He submitted that the Judge failed to consider all of the factors pointing to such participation together, and he emphasised two particular features, namely Mr Winter's involvement in Mr Ramsden's false persona and the circumstances surrounding BNP3.
91. We can deal with Hockley Mint's challenge shortly.
92. The law is well-settled. There is a general duty for a judge to give reasons. What is required of the judge will differ from case to case depending on the nature of the issues that arise. Transparency is the watchword. There is no duty on a judge to deal with every argument presented. It is sufficient if what he or she says shows the parties the basis on which he/she acted: see English v Emery Reimbold & Strick Ltd [2002] 1 WLR 2409 at [6] and [17].
93. As for the challenge to the Judge's findings, the relevant principles were summarised helpfully and most recently in JSC BTA Bank v Ablyazov [2018] EWCA Civ 1176. There Leggatt LJ stated at [43]:

"…the principle is firmly established that an appellate court should only interfere with a finding of fact made by the trial judge if satisfied that the conclusion is "plainly wrong". …"[W]hat this amounts to is that it must be possible to identify a material error in the judge's process of reasoning – such as "a material error of law", or the making of a critical finding of fact which has no basis in the evidence, or a demonstrable misunderstanding of relevant evidence, or a demonstrable failure to consider relevant evidence…; or, if there is no such identifiable error and the question is simply one of judgment as to the appropriate weight to be given to the relevant evidence, the appellate court must be satisfied that the judge's conclusion "cannot reasonably be explained or justified".."

94. It does not matter, with whatever degree of certainty, that the appellate court considers that it would have reached a different conclusion. What matters is whether the decision under appeal is one that no reasonable judge would have reached – see Henderson v Foxworth Investments Ltd [2014] 1 WLR 2600 at [62] (Lord Reed).
95. This was multi-layered and hard-fought litigation, during the course of which Mr Winter gave evidence and was cross-examined at length. The issues ranged far beyond those now highlighted and relied upon by Hockley Mint on appeal. By way of example, Mr Winter faced allegations that delivery notes had been forged and equipment not delivered at all, alternatively that he delivered "any old equipment" because he knew that in reality Hockley Mint did not need it. These were issues all resolved in Mr Winter's favour in findings that are not criticised.
96. Looking at the judgment as a whole, it cannot be said either that the Judge failed to give adequate reasons for his conclusions or that the findings of fact that he made were perverse, in the sense that no reasonable judge properly directed could have made the findings on the evidence that he did. In reality, Hockley Mint's submissions amount to no more than an invitation to this Court to substitute its views for those of the Judge, who had the benefit of seeing and hearing all the evidence over the course of a lengthy trial.
97. The Judge was clearly aware of the force of Hockley Mint's position by reference to the use of a false persona for Mr Ramsden. At paragraphs [51] to [53] he rehearsed Mr Winter's evidence as to how the adoption of Mr Hansen as a pseudonym came about and referred to the emphasis "naturally" placed by Hockley Mint on this "somewhat bizarre" process. He recorded Mr Winter's explanation of the arrangement. He was entitled to conclude that the matter did not add much to the case and that, by itself, it "certainly d[id] not make good the case for fraud against Mr Winter".
98. The Judge was also fully aware of Hockley Mint's attack by reference to the circumstances surrounding BNP 3 (and indeed the preceding two transactions as well). The Judge had before him a bundle of BNP Paribas disclosure recording BNP Paribas' internal approval procedures. BNP Paribas was aware of all the features now relied upon by Hockley Mint in relation to BNP 3 as pointing to a fraud, but had no apparent concerns. The Judge made the key finding in this regard as follows:

"…Mr Winter confirmed in his own evidence, that he authorised BNP1 in May 2015 and also authorised the later transactions as well. He saw nothing wrong with them, as neither did the financiers who financed them. They did not know about the representations that Mr Ramsden was making…"

99. It does not appear correct for Hockley Mint to say that Mr Ramsden received no benefit as a result of BNP 3. BNP 3 was one of three agreements making up the overall deal being presented to Hockley Mint. So much is made clear by Mr Ramsden's email of 8 February 2016 to Hockley Mint and recorded at paragraph [26] of the first judgment. Whether or not Mr Ramsden received commission under BNP 3, he did so under those other two agreements. Moreover, Mr Winter's evidence was to the effect that Mr Ramsden received a benefit under BNP 3 in the form of settlement of outstanding loans to Mr Winter. This perhaps demonstrates the dangers of isolating on appeal points in a case that was littered with nuances and detail which the Judge, engaged in a lengthy three-week trial, was eminently well-placed to assess.
100. As for the overall picture, Hockley Mint's submission that the fraud could not have been perpetrated without Mr Winter selling the equipment to BNP Paribas misses the point. The fact that Mr Winter played an essential part in the mechanism of the transactions does not mean that he was a knowing participant in Mr Ramsden's deceit. This was not a situation where the Judge simply relied on Mr Winter's performance in the witness box, although the "favourable impression" made by Mr Winter on the Judge was clearly a consideration which he was entitled to bear in mind. As the Judge said in terms: "...the matter [did] not end there". It needed to be considered by reference to "the inherent probabilities" and Mr Winter's experience as a businessman. The Judge was well aware of the substantial profit made by Mr Winter, recording Mr Winter's acceptance of the same: it was why he was in business. It cannot be said that the Judge failed properly to evaluate the evidence in the round.
101. Standing back, the Judge was entitled to reach the conclusions that he did on the question of Mr Winter's primary liability for deceit and conspiracy for the adequate reasons that he gave. There is no basis for this appellate court to interfere with the Judge's finding of fact that Mr Winter was not a dishonest participant in a fraud on Hockley Mint. The challenge by Hockley Mint to his findings on this question is dismissed.

Conclusion

102. For the reasons above, we remit for re-hearing and determination by a different Judge of the Chancery Division of the High Court the issue of Mr Winter's vicarious liability on the grounds of Mr Ramsden's ostensible authority.