In the realm of corporate governance, the case of Technovaa Packaging Industries (Pty) Ltd v Main Street 1051 (Pty) Ltd 2025 JDR 0965 (KZP) serves as a reminder of the importance of proper authorisation in corporate agreements. This case underscores the complexities and potential pitfalls associated with unauthorised delegation and the concept of ostensible authority.

Background and Core Issues

The dispute arose from two purported master rental agreements allegedly concluded between Technovaa Packaging Industries and Main Street 1051. The central issue was whether Mr. Steven Crowley, an employee of Technovaa, had the authority to bind the company to these agreements. The court a quo had previously found in favour of Main Street, validating the agreements based on the concept of implied actual authority. However, upon appeal, the High Court scrutinised the validity of the authorisation and delegation processes involved.

Unauthorised Delegation

The crux of Technovaa’s argument was that Mr. Crowley lacked the necessary authority to enter into the agreements. The court found that the authority granted to Mr Cranston did not encompass commercial agreements and Mr. Cranston accordingly lacked the necessary authority to bind Technovaa to the agreements, the absence of which renders them void. In this regard, the court found that the authority granted to Mr. Cranston was personal in nature and specifically tied to his role and expertise in tax matters and that the power to delegate authority within a corporate structure must flow from proper board authorisation. This highlights a fundamental principle of corporate governance: an agent cannot delegate more power than they possess, and proper board authorisation is essential for such delegations.

Ostensible Authority

Main Street argued that even if actual authority was lacking, Mr. Crowley possessed ostensible authority to bind the company. Ostensible authority arises when a company, through its conduct, leads a third party to reasonably believe that an individual has the authority to act on its behalf. In this case, Main Street relied on the fact that Mr. Crowley had been introduced as the financial representative and had successfully signed multiple agreements without objection from Technovaa.

However, the court found that Main Street’s reliance on ostensible authority was misplaced. Main Street had specifically required proof of actual authority through a board resolution, which proved defective. The court emphasised that ostensible authority cannot be invoked when the third party has insisted on and relied upon actual authority. This distinction is crucial in corporate transactions, as it underscores the need for clarity and proper documentation of authorisation.

Conclusion

The case reinforces the importance of proper authorisation and the limitations of delegation within corporate structures. It also illustrates the nuanced application of ostensible authority in commercial transactions. Companies must ensure that their internal processes for granting and delegating authority are robust and clearly documented to avoid disputes and potential liabilities. This case serves as a valuable lesson for corporate entities to adhere strictly to governance principles and maintain transparency in their authorisation procedures.