I Thought I Was Authorised

Agency, estoppel, and the legal risk hiding in everyday accounting decisions.

The Risk You Don’t See Coming

Most accountants do not consider authority to be a daily legal concern. You focus on compliance, accuracy, deadlines, and client service. You are problem-solvers. You step in when your client is under pressure. You fix issues before they escalate.

Yet one of the most significant sources of professional exposure in SME practice has very little to do with tax law or accounting standards. It has to do with authority — specifically, whether you were properly authorised to act when you did.

In a recent CPD session, I explored the law of agency and estoppel from a practical perspective. Not as academic theory, but as a real-world risk framework that governs the way you interact with clients, banks, creditors, regulators, and third parties.

Because whether you realise it or not, every time you act on behalf of a client, you are operating within the law of agency.

When Helping Becomes Binding

Agency, in simple terms, exists when one person is authorised to act on behalf of another. In your practice, the client is the principal and you are the agent.

The moment you step into a position where you are making representations, giving confirmations, or taking decisions that affect your client’s legal or financial position, you are acting as an agent.

This does not only occur when you submit routine returns. It happens when you confirm to a bank that a client’s cash flow projections support a loan application. It happens when you negotiate a payment arrangement with a creditor on behalf of a struggling business. It happens when you advise a client to proceed with a transaction and then communicate that position to the other party involved. It can arise when you reassure a supplier that “the payment will be sorted,” or when you confirm that a board resolution has been properly authorised.

In each of these situations, you are not simply relaying information. You are creating reliance. The third party may make decisions based on what you say or do. The legal question that follows is not whether you intended to help, but whether you were properly authorised to create that reliance.

That distinction is where risk begins.

The Three Faces of Authority

Authority is not a single concept. It can arise in different ways, and understanding the differences is critical for protecting your practice.

Express Authority – The Written Mandate

Express authority is the clearest and safest form. It exists when the client explicitly authorises you to perform specific tasks, usually in writing.

A properly drafted engagement letter that clearly defines your scope of work is your strongest protection. If your mandate states that you are authorised to prepare and submit specific returns, represent the client before SARS within defined parameters, or liaise with certain institutions, then the boundary is visible.

When disputes arise, courts and insurers start with documentation. If the scope is defined and you remained within it, your position is considerably stronger.

However, even express authority has limits. If you step beyond the written mandate (even with good intentions) you may be acting without protection.

Implied Authority – The Habit That Expands

Implied authority arises not from words, but from conduct and context.

If you have for years engaged with a client’s bank, handled minor disputes with suppliers, or represented the client in negotiations without objection, it may be implied that you are authorised to continue doing so.

The difficulty is that implied authority evolves. What begins as minor administrative interaction may, over time, extend into significant financial representations. A new transaction, larger financing arrangement, or distressed restructuring can dramatically change the stakes, while the pattern of informal conduct remains unchanged.

The problem is not that you acted. The problem is that no one paused to redefine the boundary.

Ostensible Authority – When Appearances Matter

Ostensible, or apparent, authority arises when a third party reasonably believes you have authority because of how the client has allowed you to act.

The Constitutional Court clarified this principle. The Court confirmed that a principal may be bound by authority that appears to exist, even if no formal authority was granted, where the principal’s conduct created that impression and a third party relied on it.

In practice, this means that if your client consistently allows you to represent them in negotiations, confirm financial positions, or sign documentation, a bank or creditor may reasonably assume that you are authorised to do so in similar future matters.

If a dispute later arises, the focus will be on whether the client created the impression of authority and whether the third party relied on that impression. The absence of a written mandate between you and your client may not prevent consequences from flowing.

Estoppel – When Conduct Locks You In

Closely related to ostensible authority is the doctrine of estoppel.

Estoppel prevents a party from denying a state of affairs if their conduct caused another party to rely on that state of affairs to their detriment.

In professional terms, if your conduct and your client’s conduct together create the impression that you are authorised to act in a certain way, and a third party relies on that impression, the law may prevent the client from later denying your authority.

South African courts have repeatedly reinforced this principle, emphasising that authority can arise from conduct and patterns of behaviour, not only from formal documentation.

For accountants, this means that repeated informal practices can solidify into legally recognised authority.

Over time, habit becomes expectation. Expectation becomes reliance. Reliance becomes liability.

Why SME Practices Are Especially Exposed

Chartered Business Accountants in Practice operate in environments built on trust. Many clients are long-standing. Communication is informal. Decisions are often made quickly.

Clients may say, “You handle it,” without defining what “it” includes.

While that trust is a strength, it also increases risk. The more integrated you become in your client’s operations, the easier it is for boundaries to blur. The more you represent them externally, the more third parties may view you as an authorised decision-maker.

When transactions succeed, no one questions authority. When transactions fail, authority becomes central.

And in that moment, documentation matters more than memory.

The Insurance and Regulatory Dimension

Authority is not only a civil law issue. It has direct implications for professional indemnity insurance and regulatory exposure.

Professional indemnity policies typically respond to claims arising from services rendered within the scope of your professional mandate. If it is alleged that you exceeded your authority, insurers may examine whether the act falls within covered services.

Regulatory bodies also assess whether members acted within the limits of their professional duties. Indeed, courts will uphold disciplinary outcomes where professional obligations were not properly discharged. Although each case turns on its own facts, the broader principle is consistent: professionals are expected to understand and respect the boundaries of their authority.

Uncertainty about authority can therefore translate into reputational, financial, and regulatory consequences.

The Engagement Letter: Your First Line of Defence

A carefully drafted engagement letter is not a formality. It is a risk management instrument.

It should clearly define:

• The services you will provide.

• The limits of your authority.

• Situations requiring additional written instructions.

• Matters that fall outside your mandate.

It should also evolve. As the client’s business grows, restructures, or enters new financial arrangements, the scope of your engagement should be reviewed and updated.

A static document cannot govern a dynamic relationship.

Documentation Is Professional Discipline

Verbal instructions should be confirmed in writing. A brief follow-up email summarising what was agreed can prevent years of dispute.

File notes should be contemporaneous. Significant representations made to third parties should be supported by documented client approval.

These practices are not bureaucratic obstacles. They are practical safeguards that demonstrate diligence, protect your professional standing, and strengthen your defensibility if your actions are ever scrutinised.

Professionalism in this context means being intentional rather than reactive.

Authority Is Not Administrative — It Is Strategic

Agency and estoppel are not legal technicalities designed to trap well-meaning professionals. They are mechanisms that regulate trust, reliance, and accountability in commercial life.

By clearly defining and documenting your authority, you do more than reduce legal exposure. You strengthen your credibility. You demonstrate discipline. You position yourself as a professional adviser rather than an informal facilitator.

In a competitive market, that distinction matters.

Join the Chartered Institute for Business Accountants and we will show you how to structure your engagements properly, manage authority risks with confidence, and build a practice that is both compliant and commercially secure.