A notice of arbitration emailed to a company employee was not good service, leading to the resultant arbitration award being set aside. The court applied agency principles to determine whether service by email on an individual could be attributed to the company for which that employee worked. The ruling underscores an important distinction between employees with commercial roles and those with dispute handling functions, in terms of authority to accept service. The article also looks briefly at Sino Channel Asia Ltd v Dana Shipping & Trading PTE Singapore & anr, another recent decision relating to service of a notice of arbitration: Glencore Agriculture B.V. (formerly Glencore Grain B.V.) v Conqueror Holding Ltd [2017] EWHC 2893 (Comm)

The claimant, Glencore, and the defendant, Conqueror, were parties to a voyage charterparty agreement which contained a London-seated arbitration agreement on LMAA terms. A dispute arose because of delays at the load port. Conqueror sent correspondence relating to the arbitration, including a notice of arbitration and a notice in default of arbitrator appointment under s17 Arbitration Act 1996 (the Act) by email to Mr Florian Oosterman (Mr O), a junior employee of Glencore who had previously sent some instructions for the vessel by email. Various submissions and Tribunal directions were also sent to Mr O’s email address. Mr O left Glencore a few months later. Glencore had been unaware of the proceedings until it received an arbitration award against it by post.

Glencore seeks to set aside award

Glencore argued that there had been no valid service. As a junior back office employee, Mr O had no authority to accept service of originating process. None of the communications had been passed on to Glencore’s chartering and legal department.

Service under the Arbitration Act is permissive

Popplewell J noted that s76(3) of the Act under which “[a] notice or other document may be served on a person by any effective means” is permissive and less restrictive than English court rules (the Civil Procedure Rules (CPR)) in relation to the use of email for service purposes.

Generic email addresses

Popplewell J distinguished generic email addresses from an individual employee’s email address. A generic email address, which is held out to the world as the only email address of a company, can be used for service of an arbitration notice.1 A company can be expected to ensure that a generic email address is opened by someone responsible for putting it in the hands of whoever needs to deal with it on behalf of the company. Popplewell J stated that the sender can reasonably expect a person who opens an email sent to a generic address to be authorised to deal with its contents if the subject matter of the email corresponds with the activity for which the email has been listed. This suggests that a common sense approach of choosing the most appropriate generic address should be followed, in case a company lists more than one generic email address.

Individual email addresses

In the case of an individual email address, whether the email constitutes good service depends on the particular role that the individual plays or is held out as playing in the organisation. The court ruled that agency principles govern whether the acts of an employee bind the company.

Whether a company is bound by a notification to an employee depends on whether the company has granted the employee actual authority (express or implied) to receive the notification on the company’s behalf, or alternatively whether representations made to a third-party (in this case Conqueror) about the employee’s authority to receive the notification are such that the company is estopped from denying such authority (ie ostensible authority).

The court referred favourably to Eder J’s statement in Sino Channel Asia Ltd v Dana Shipping & Trading PTE Singapore & anr [2016] EWHC 1118 Comm which confirmed that even where an employee or agent has a wide general authority to act on behalf of the company, such authority does not (without more) generally include an authority to accept service of a notice of arbitration. Whilst the facts of Sino Channel (discussed below) concerned service of process upon a third-party agent, rather than an employee, Popplewell J confirmed that the same concepts apply whether the individual in question was an employee, a consultant or an agent.

The Sino Channel decision – service on a third-party individual

Whilst Sino Channel usefully discussed applicable agency principles in the context of service of process, it concerned a unique set of facts. A party to a contract (Sino) was, unbeknownst to the counterparty (Dana), “fronting” the contract for another business (BX). The contract contained a London seated arbitration agreement. Dana emailed the notice of arbitration and other procedural notices to an email address belonging to a Mr Cai (Mr C), who had been Dana’s almost exclusive point of contact and who had presented himself as a Sino employee but was in fact employed by BX. Sino only got to know of the arbitration proceedings when the award arrived at its registered address.

The question, as in Glencore, related to whether the notice of arbitration had been validly served. On appeal from Dana, the Court of Appeal upheld the award and overturned the first instance judgment ([2017] EWCA Civ 1703).

As reiterated in Glencore, the court drew on previous case law to emphasise that authority to accept originating process is a distinct type of authority, not to be conflated with wide general authority. If such authority is given impliedly or ostensibly, rather than expressly, particular scrutiny of the facts is required to establish this. Since Mr C had no express authority, such scrutiny was required in this instance. On the unique and remarkable facts of the case, the court found that Mr C was impliedly and ostensibly authorised to accept service of process.

A distinction between commercial and dispute handling roles

In the Glencore v Conqueror decision, Popplewell J distinguished between the commercial and dispute handling functions of an organisation. Care should be taken not to merge general authority to conduct business with specific authority to accept service of legal process. However, an employee of sufficient seniority entrusted with dispute handling and resolution could have implied actual authority to accept service of originating process.

On the evidence, the court found that:

  • Although Mr O had been involved with the commercial operations underlying the dispute, this was not sufficient to authorise him, expressly or by implication, to accept a notice of arbitration related to those commercial operations. Popplewell J relied on the Court of Appeal’s decision in Sino Channel, which confirmed that details of the actual circumstances, conduct and nature of the relationship between the two parties are key to deciding this question, particularly where authority is being inferred. The court found no evidence of express or implied authority in his contract or any other document in his personnel file.
  • There was no holding out by Glencore to Conqueror that Mr O had anything but a limited operational role relating to the voyage. Again, Sino Channel was referred to, since it emphasised that even greater scrutiny of the facts was required to support a finding of holding out authority to accept service of process.

On the basis of the above findings, Popplewell J held that Glencore was not effectively served with the notice of arbitration or the other procedural notices, and was entitled to relief under s72 of the Act.

Comment

In the context of disputes, the importance of valid service cannot be over-emphasised, as invalid service can halt an otherwise viable claim. Improper service can also completely invalidate the final arbitral award without any recourse (as seen in Glencore) and, due to the lapse of time during the proceedings, can sometimes lead to the cause of action being time-barred. The Glencore and Sino Channel decisions provide useful guidance as to what might constitute valid service by email of notices related to arbitration. Both decisions reflect the importance of care being taken when serving a notice of arbitration, particularly by email.

Commercial contracts typically contain general notification provisions with addressees for notices relating to the particular agreement. If so, the notice of arbitration for a dispute arising out of the contract should be sent to that address. If there is no such provision, the party serving the notice should check who (if anyone) has authority to accept service, often within the legal department of the entity being served or its external counsel. It should not be assumed that any individual employee of the entity has authority to accept service simply because he or she was involved in the commercial operations relating to the contract. If it is not desirable or possible to establish the identity of a person authorised to accept service, notice of arbitration can be sent by the methods set out in s76(4) of the Act, which are deemed to constitute good service.

Service of a claim form by email under English court rules is only allowed where the defendant has given prior permission to receive a claim form by email.