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Supreme Court: attribution of the appearance of a power of attorney

Supreme Court: Legitimate expectations that a power of attorney appea

Supreme Court: attribution of the appearance of a power of attorney

02.08.2017 NL law

In three recent judgments, the Supreme Court clarified the boundaries of the risk principle criterion set out in its ING/Bera judgment: the risk principle does not reach so far that it also applies in situations where the expectations are based solely on statements or behaviour of the unauthorized attorney. The court must also assess the facts and circumstances that concern the unauthorized represented principal to justify the principal bearing the risk of the unauthorized representation.

Supreme Court 3 February 2017 (ECLI:NL:HR:2017:142), Supreme Court 3 February 2017 (ECLI:NL:HR:2017:143 ) and Supreme Court 14 July 2017 (ECLI:NL:HR:2017:1356 ).

The ING/Bera criterion (Supreme Court 19 February 2010, ECLI:NL:HR:2010:BK7671) entails that attribution of the appearance of a power of attorney having been granted is also possible if the counterparty had legitimate expectations as regards the power of attorney being granted based on facts and circumstances that are for the risk of the unauthorized represented principal and from which according to prevailing opinion (verkeersopvattingen) such appearance can be derived.

In the first judgment of 3 February 2017, a real estate entrepreneur (the "Principal") had to repay the mortgage that was vested on a part of his portfolio. Due to financial difficulties, he saw no option other than to sell this part. The Principal asked his lawyer (the "Attorney") to look for a potential buyer. Previously, the Attorney had been involved as the Principal's lawyer in legal proceedings relating to this part of the portfolio. As a result, the Attorney possessed copies of the underlying loan agreement, the option agreement and the deed of mortgage. The Attorney negotiated the sale and purchase of this real estate with another real estate entrepreneur (the "Purchaser"). The Attorney agreed with the Purchaser that he, or a third party designated by him would purchase that part of the Principal's portfolio. To draft the purchase agreement, the Attorney provided the civil law notary involved with the documents he possessed. Shortly before the Principal and the Purchaser were supposed to meet with the civil law notary to sign the purchase agreement, the Principal informed the Attorney that in the meantime he had reached (a better) agreement with a another third party regarding the sale and purchase of the real estate. After this, the Attorney informed the Purchaser that the deal was off.

The Purchaser commenced legal proceedings and demanded, among other things, performance of the purchase agreement because it had appeared to him that the Attorney had been granted a power of attorney. The Principal argued that no agreement had been reached between them because he had not granted the Attorney a power of attorney to conclude the sale and purchase agreement on his behalf.

The Purchaser's claim was rejected by the Amsterdam District Court. The District Court compared the Attorney's role to that of a real estate broker. Generally, under Dutch law, a request to a real estate broker to act as an intermediary between seller and buyer does not include a power of attorney to conclude a sale and purchase agreement (Supreme Court 9 August 2002, ECLI:NL:HR:2002:AE2380 ).

The Amsterdam Court of Appeal applied the criterion set out in the ING/Bera-judgment and assessed facts and circumstances that were for the risk of the Principal. The Court of Appeal considered that based on the circumstances of the case, particularly the fact that the Attorney possessed all relevant documents and the fact that the Attorney was a lawyer and acted in that capacity, it appeared that the Principal had granted a power of attorney to the Attorney authorizing him to conclude the sale and purchase agreement.

The Supreme Court rejected the Principal's appeal in cassation but clarified the boundaries of the ING/Bera-criterion, especially that the ING/Bera risk principle does not reach so far that it applies in situations where the expectations are based solely on statements or behaviour of the unauthorized attorney. Following the ING/Bera judgment, the court must also assess the facts and circumstances that concern the unauthorized represented principal to justify the principal bearing the risk of the unauthorized representation. According to the Supreme Court in this case, the following facts and circumstances were for the risk of the Principal: (i) the fact that the Principal had asked the Attorney to look for potential buyers and in doing so placed the Attorney in a position where it appeared that a power of attorney had been granted; (ii) the Purchaser knew the Attorney had represented the Principal as his lawyer in a different matter relating to the same real estate; and (iii) the Attorney possessed all relevant information, which also contributed to making it appear that the Principal had granted a power of attorney, even though the Principal had provided the Attorney with that information for the purposes of another matter.

In the second judgment of 3 February 2017, the Supreme Court repeated its position on the boundaries of the ING/Bera-criterion. In this case, the Supreme Court held that it was not possible to conclude that it appeared a power of attorney had been granted because there were no facts or circumstances concerning the unauthorized principal. Therefore, the unauthorized attorney acted alone, without any instruction or involvement of the principal.

In its judgment of 14 July 2017, the Supreme Court referred to both the ING/Bera-judgment and the first judgment of 3 February 2017. This most recent judgment concerned a dispute between members of an owners' association (Vereniging van Eigenaren) regarding a notarial deed of division of apartment rights that also contained an amendment of the voting proportions. The main question was whether the power of attorney granted to execute the notarial deed included the authority to change the proportions of the voting rights. Contrary to the Amsterdam District Court, the Amsterdam Court of Appeal held that the appearance that a (sufficient) power of attorney had been granted was created by the statements and behaviour of the claimants. The Supreme Court concluded that the Court of Appeal had based its judgment mainly on the omission of the claimants to respond to an email from the civil law notary to which the draft deed was attached (and which included the undesired change of voting proportions). According to the Supreme Court, that sole omission was (without further reasoning) not sufficient for the other party to the deed to conclude that the (draft) amendment deed met the claimant's desires. An email sent by claimants in response to another email from (an associate of) the civil law notary - and apparent to respondent - showed that the claimants had assumed that the final deed would contain voting rights proportions that would meet their desires and that deviated from the voting rights proportions set out in the draft deed.

According to the Supreme Court, the fact that the voting rights proportions as set out in the draft deed were laid down in a deed executed before a civil law notary and the fact that the notarial deed stated that the civil law notary was granted a power of attorney to execute the deed, was – without additional circumstances – just a declaration of behaviour of the notary. The Supreme Court considered it not to be a fact or circumstance that was for the risk of the unauthorized represented principal.

These three judgments clarify the boundaries of the ING/Bera criterion for assessing whether it appears that a power of attorney has been granted. The Supreme Court stated that facts or circumstances that are for the risk of the principal are not based solely on statements or behaviour of the unauthorized attorney but also on facts and circumstances that concern the unauthorized represented principal. It is not relevant that those facts or circumstances are not apparent to the third party. However, in assessing whether or not it appears that a power of attorney has been granted, the profession or position of the unauthorized attorney may be important.

Team

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