On appeal, Justice Estey for the majority of the Supreme Court held that CanLab had made no representations to Engelhard as to Cook's authority until the referral was made (to Cook) after Engelhard's original inquiry in October 1966 about the timing of payments, thereby equipping Cook with ostensible authority to act from that point on.
Fridman remarks that "[i]f an agent did not have ostensible authority to enter into a transaction .
Lord Keith for the Law Lords observed that an agent's ostensible authority may arise where the agent has had a course of dealing with a particular third party and the agent's principal has acquiesced to the dealing and has honoured transactions that have previously arisen from it.
Although passive acquiescence may amount to a holding out or a permitting so as to create ostensible authority, that can only happen, in the absence of a direct representation by the principal, when the agent is in the course of his ordinary duties: "There is no 'permitting' in the sense of binding the principal where the agent is not in the course of his ordinary duties or where there is no representation at all from the principal or from someone in a directory capacity to act for a corporate principal" (107)
138) Accordingly, the Court of Appeal concluded that the position of the bank's senior manager was such that he was clothed with the ostensible authority to act as he did in communicating that the head office had rendered its approval for the facility set out in the commitment letter.