Short answer

A construction bond or supporting indemnity should not be treated as secure simply because it carries an employee’s signature. Equally, a company will not necessarily escape an indemnity by saying afterwards that the person who signed it lacked authority.

In Ion Surety Company SA and another v Shapoorji Pallonji Mideast LLC [2026] EWHC 2758 (TCC), handed down on 27 October 2026, the Technology and Construction Court upheld a cross-company indemnity supporting an on-demand construction bond. The court found actual authority and, in the alternative, apparent authority. The claim succeeded for £3.5 million, the indemnity’s limit.

What happened?

A Shapoorji Pallonji group company was contractor on a construction project at Axe Street, Barking, under a JCT Design and Build arrangement. The employer required a bond. Ion Insurance issued an on-demand bond and an associated Ion company provided reinsurance support. A different Shapoorji Pallonji group company, Shapoorji Pallonji Mideast LLC (SPME), entered into a cross-company indemnity to support the security arrangements.

The employer later demanded payment under the bond. Following a settlement, Ion Insurance paid out and Ion Surety reimbursed it under reinsurance arrangements. Ion Surety then sought recovery from SPME under the indemnity.

SPME resisted payment. Its principal argument was that the individual who signed the indemnity did not have authority to bind it. There were also disputes about who could claim and whether the reinsurance reimbursement was a loss or liability covered by the indemnity.

What did the court decide?

The court examined the corporate documents, board approval and delegated powers, as well as the surrounding dealings. The actual-authority question involved the corporate-law requirements applicable to SPME, a Dubai company. On the evidence, the judge found a sufficient chain of authority to sign the indemnity. An inaccurate description of the signatory’s capacity did not negate authority that otherwise existed.

The court also considered apparent authority as an alternative. This is not established merely because a signatory says they are authorised. It requires an appropriate representation attributable to the company, reasonable reliance and an assessment of whether the counterparty was put on inquiry. The judge concluded that Ion had made reasonable checks and that the indemnity would have bound SPME on this alternative basis too.

A further issue was the financial route by which the bond was supported. Ion Surety had reimbursed the bond issuer under reinsurance arrangements. Applying the indemnity’s wording, the court found that Ion Surety had suffered a covered liability or loss by virtue of the bond. It was entitled to recover £3.5 million, the contractual cap.

This was a fact-sensitive judgment about particular contractual and corporate documents. It is not a rule that any apparent senior employee can bind a company or that any payment made in connection with a bond is automatically recoverable.

Why does this matter for construction businesses?

A building contract, bond, parent-company guarantee and indemnity may involve several different legal entities. The contractor may not be the indemnifier; the insurer that issues the bond may not be the entity that ultimately carries the loss.

Authority is a practical risk. A contractual security package may be disputed years after signature, when the individuals involved have moved on and board documents are difficult to locate. A job title alone is not a substitute for evidence of authority.

Corporate identity matters. Groups should identify precisely which company gives the guarantee or indemnity. Overseas companies may have different rules on execution and delegated powers.

Wording matters. If the parties expect the indemnity to respond to a payment by an affiliated insurer or reinsurer, that financial route should be covered clearly by the instrument. The sum secured, permitted demands and limit of liability should not be left to assumption.

What should project teams do now?

  1. Identify every contracting entity. Record the exact names of the employer, contractor, bond issuer, guarantor, indemnifier and any intended affiliate beneficiary.
  2. Check the authority chain. Obtain relevant board resolutions, powers of attorney and delegation records before executing an indemnity or group guarantee. Consider the law of the company’s incorporation.
  3. Review bond conditions. Distinguish on-demand bonds from conditional performance bonds. Check the beneficiary, trigger, notice method, expiry and any cap.
  4. Read related instruments together. Confirm that a reinsurance or reimbursement payment, if part of the intended structure, falls within the indemnity and that the correct entity may enforce it.
  5. Keep the paper trail. Retain original signed instruments, approval records, correspondence, demands, settlement documents and proof of payment.
  6. Act quickly on a demand. A disagreement about signing authority should not lead a business to ignore a bond or indemnity claim without checking the contractual wording and any deadlines.

What remains uncertain?

The result depended on evidence about SPME’s actual authority, the court’s apparent-authority analysis and the specific indemnity terms. Different facts, company documents or governing laws may lead to different outcomes. The judgment is a first-instance TCC decision, not a substitute for reviewing a live security package.

Verifiable sources

Need advice on a live matter?

HQ Law advises construction and engineering businesses on contract security, performance bonds, guarantees, indemnities and related commercial disputes. Where a bond demand or disputed guarantee is live, early review of the documents and deadlines is important.

This article provides general information only and is not legal advice on any particular bond, contract or dispute.