Criterion Properties plc v Stratford UK Properties LLC [2004] UKHL 28

Court: House of Lords

Facts: Criterion Properties, a publicly traded company, entered into a joint venture with Stratford, a private investment vehicle. An amendment to their investment agreement granted Stratford a "poison pill" put option in case of a change in control. This was done without the board’s knowledge. Upon discovery, Criterion dismissed the managing director who authorized the amendment. Criterion sought a declaration that the amendment was unenforceable.

Issue: Was the amendment to the investment agreement made by the managing director enforceable given that it was allegedly against the commercial interests of Criterion?

Held: The House of Lords held that the issue of authority should be determined at trial.

Key Judicial Statement: Lord Scott noted, “If a person dealing with an agent knows that the agent does not have actual authority to conclude the contract or transaction in question, the person cannot rely on apparent authority...”

💡 Leveluplaw: Directors must not use their powers to frustrate a takeover bid improperly, such as through "poison pills." If dealing with an agent, one cannot rely on apparent authority if they know the agent lacks actual authority or if the transaction is contrary to the company's commercial interests.