Sino Channel Asia Ltd v Dana Shipping & Trading Pte Singapore Ltd & Anr [2017] EWCA Civ 1703

Background

The case looks at the question of when notices of arbitration passed to a counterparty’s agent can be considered effective service on the counterparty in circumstances where that the agent is not authorised to receive the notice. It was held by the Court of Appeal that in this case, the agent possessed both implied actual and ostensible authority to receive the notice; however, this “rare case” was decided very much on its facts.

Dana (as Owner) had a claim against Sino (as Charterer) under a Contract of Affreightment (“COA”) dated 9 April 2013. Sino’s role in the negotiation was restricted to its director signing his name – it was fronting for a Chinese company, BX, which was to handle the day to day operation of the COA.

All but one of the communications following signature of the COA were between Dana and a Mr Cai of BX, though Dana believed they were in contact with employees of Sino and were completely unaware of BX’s involvement. Indeed, Sino’s broker informed Dana’s broker that Mr Cai was Sino’s representative or employee.

Dispute and previous proceedings

When disputes arose under the COA, Dana sent the notice of arbitration via the brokerage channel on the 4 and 5 February 2014. The brokers forwarded this to Mr Cai. Sino only became aware of the arbitration on or about 30 June 2015 when the Award was sent to their offices. Sino’s position was that Mr Cai had not been authorised to handle arbitration matters and had been acting without the authority of Sino or BX.

On 28 January 2016, Sino, as a person alleged to be a party to arbitral proceedings but who had taken no part in the proceedings, applied to court under s 72 Arbitration Act 1996 for a declaration, questioning whether the tribunal was properly constituted and / or what matters had been submitted to arbitration.

The Commercial Court upheld all limbs of Sino’s claim, holding that BX did not have authority to receive the notice on Sino’s behalf.

Dana’s appeal to the Court of Appeal rested on three grounds:

  1. Did BX have implied actual authority to receive notice on Sino’s behalf?
  2. Did BX have ostensible authority to receive notice on Sino’s behalf?
  3. Ratification: assuming the answer to the first two points was ‘no’, had Sino ratified BX’s receipt of notice?

Court of Appeal Judgement

Dana’s appeal was upheld in relation to the first two issues.

Implied actual authority

The court highlighted that the key enquiry as to actual authority goes to the relationship between the principal and the agent: i.e. on what may be inferred from the conduct of the parties. Consideration was given to the fact that it has been held previously that the fact that a party has general authority does not, without more, mean that it has authority to accept service of originating process.

This means that the factual circumstance of each case have to be looked at carefully.

In this case, the Court of Appeal, in overturning the judge at first instance, found that “the correct inference to be drawn from the actual circumstances of the relationship between Sino and BX is that BX did have implied actual authority to accept service of the notice.” This involved a consideration not only of the circumstances leading up to Dana’s belief that Mr Cai was a representative of Sino, but also the responses of Sino after they learned of the disputes under the COA and / or were served with the award. This was also reinforced by the position of Triton, Sino’s brokers, who themselves passed the notice of arbitration on to BX.

Having found that there was implied actual authority to receive notice on Sino’s behalf, the Court of Appeal was able to deal with the other two issues shortly.

Ostensible authority

As to ostensible authority, this relates to the authority of the agent as it appears to others. Although actual and ostensible authority are conceptually very different, in this particular case they coincided: the unusual relationship between BX and Sino affected how their authority appeared to others and the appearance, in particular to Dana, was that BX/Mr Cai were to be dealt with for all purposes, without limitation, which therefore extended to receipt of the notice.

Ratification

It was only on the question of ratification that the judge’s decision at the first instance was upheld, the Court of Appeal being “wholly unpersuaded that Sino ratified BX’s receipt of the notice”: it could discern “no equivocal action, positively ratifying BX’s receipt of the notice”.

Points to note

  • A finding of ostensible authority calls for even more caution than one of implied actual authority. Each case depends very much on its facts and this case is no exception, but it does illustrate the issues the courts will consider.
  • Beware of email addresses which are similar but not quite the same as a company name (this applies to cyber issues too…). Although nothing turned on this in the Court of Appeal, one of the email addresses for Mr Cai included the name “sina” which could easily be confused with “sino”.
  • If in any doubt, serve in accordance with s 76 Arbitration Act 1996. In this case Dana had the necessary information to serve the notice on Sino at its registered address, which would “have put the matter beyond argument”.