Notice of arbitration served on employee of associated company – implied actual authority to accept service found on the facts.
Charterers, a Hong Kong company, entered into an arrangement with a PRC Company, sellers, in terms of which contracts of purchase and sale of commodities would be entered into in the charterers’ name. Charterers’ would be remunerated at $1 per metric tonne. Sellers would be entitled to the profit on the sales. Charterers would be responsible for the negotiations while sellers would handle the operational side. Charterers effectively fronted for the sellers.
Pursuant to the arrangement, charterers entered into a Contract of Affreightment, providing for the carriage of about 275 000 mt of iron ore from Venezuela to China to be carried in five shipments from June to October 2013.
The COA provided for London arbitration. On receipt by one party of the notification of the appointment of an Arbitrator, it had 14 days to appoint its own Arbitrator, failing which the arbitration would continue under the first Arbitrator appointed.
Although the COA was negotiated by the parties’ respective brokers, an employee of sellers played a prominent role in negotiations. He was identified as the “charterers’ guy” by the seller’s brokers.
Notice of arbitration was sent by email to the employee who responded and gave the impression that he had the authority to represent the charterers.
Ship owners obtained an award from their appointee, Mr Christopher Moss, without opposition. The award was sent to Charterers’ registered address by the owners.
Charterers’ immediate reaction was to refer the award to the sellers who promised to take care of it, but never did.
Charterers sought to set aside the award under section 72 of the Arbitration Act, 1996.
Owners argued that the employee had actual implied authority, alternatively, ostensible authority to accept service of the arbitration notice.
Sir Bernard Eder set aside the award.
The Court of Appeal, Gross and Flaux LJJ, restored the arbitrator.
It was accepted by both courts that authority to accept service stood on a different footing to authority to conduct negotiations and authority to conduct the latter did not imply authority iro the former.
On the special facts of this case, the Court of Appeal considered that implied actual authority to accept service had been shown and, failing that, ostensible authority.
What was important to the Court of Appeal was the supine attitude displayed by the charterers. Everything, including the award, once it arrived, was simply referred to the sellers. Also, the specific contact employee of the sellers played a prominent role in the negotiations and execution of the Contract of Affreightment.
To have found actual implied authority, even on these facts, was still a long shot. Actual implied authority is normally only found where the agent’s authority for completed jural acts is questioned. Here the agent did nothing and was the mere recipient of service. The finding of ostensible authority stands on firmer gorund.
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