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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Golden Ocean Group Ltd v Salgaocar Mining Industries PVT Ltd & Anor  EWCA Civ 265 (09 March 2012)
Cite as:  1 Lloyd's Rep 542,  3 All ER 842,  EWCA Civ 265,  1 WLR 3674,  WLR(D) 70,  1 CLC 497,  2 All ER (Comm) 978
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ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION, COMMERCIAL COURT
Mr Justice Christopher Clarke
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE TOMLINSON
SIR MARK WALLER
| Golden Ocean Group Limited
|- and -
|Salgaocar Mining Industries PVT Ltd
Mr Anil V Salgaocar
Dominic Kendrick QC and Peter MacDonald-Eggers QC (instructed by MFB Solicitors) for Appellant (1)
Charles Kimmins QC and Luke Pearce (instructed by Bentley, Stokes & Lowless, Solicitors) for Appellant (2)
Hearing dates : 7, 8, and 9 November 2011
Crown Copyright ©
Lord Justice Tomlinson :
i) An agreement by an executor or administrator to pay damages out of his own estate;
ii) A contract of guarantee;
iii) An agreement made upon consideration of marriage;
iv) A contract for the sale or other disposition of an interest in land; and
v) A contract that is not to be performed within the space of one year from the making thereof.The purpose of the Statute was, according to Lord Hoffmann, Actionstrength Ltd v International Glass Engineering SPA  2 AC 541 at 549 ". . . precisely to avoid the need to decide which side was telling the truth about whether or not an oral promise had been made and exactly what had been promised." Parliament must have decided, thought Lord Hoffmann, that there had been "too many cases in which the wrong side had been believed." Lord Hoffmann also points out, in the same passage, that:-"It is quite true . . . that the system of civil procedure in 1677 was not very well adapted to discovering the truth. For one thing, the parties to the action were not competent witnesses. But the question of whether the Act should be preserved in its application to guarantees was considered in 1953 by the Law Reform Committee (First Report, Statute of Frauds and Section 4 of the Sale of Goods Act 1893 (Cmd 8809)) and the recommendation of a very strong committee was to keep it."Lord Bingham in his speech in Actionstrength said that section 4 was enacted "to address a mischief facilitated, it seems, by the procedural deficiencies of the day . . . the calling of perjured evidence to prove spurious agreements said to have been made orally. The solution applied to the five classes of contract specified in section 4 was to require, as a condition of enforceability, some written memorandum or note of the agreement signed by the party to be charged under the agreement or his authorised agent" – see at 544-545.
"No action shall be brought whereby to charge the Defendant upon any special promise to answer for the debt default or miscarriage of another person unless the Agreement upon which such Action shall be brought or some Memorandum or Note thereof shall be in Writing and signed by the party to be charged therewith or some other person thereunto by him lawfully authorised."
"(1) that there was a real danger of inexperienced people being led into undertaking obligations which they did not fully understand, and that opportunities would be given to the unscrupulous to assert that credit was given on the faith of a guarantee which the alleged surety had had no intention of giving;
(2) that a guarantee was a special class of contract, being generally one-sided and disinterested as far as the surety was concerned, and the necessity of writing would give the proposed surety an opportunity for thought;
(3) that the requirement of writing would ensure that the terms of the guarantee were settled and recorded;
(4) that Parliament had imposed a requirement of writing in other contractual contexts;
(5) that judges and juries were not infallible on questions of fact, and in the vast majority of cases the surety was getting nothing out of the bargain;
(6) that it was desirable to protect the small man; and
(7) that the necessity for guarantees to be in writing was generally understood."
The Law Reform Committee agreed in 1953 that writing should continue to be required for contracts of guarantee. It recommended repeal of the section so far as concerned its application to the other three remaining classes of contract and the recommendation was adopted by enactment of the Law Reform (Enforcement of Contracts) Act 1954. Section 40 of the Law of Property Act 1925 has now been superseded by section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 which requires that contracts for the sale or other disposition of an interest in land must be made in writing. A memorandum or note of an agreement is no longer sufficient.
"The terms of the statute therefore show that Parliament, although obviously conscious that it would allow some people to break their promises, thought that this injustice was outweighed by the need to protect people from being held liable on the basis of oral utterances which were ill-considered, ambiguous or completely fictitious. This means that while normally one would approach the construction of a statute on the basis that Parliament was unlikely to have intended to cause injustice by allowing people to break promises which had been relied upon, no such assumption can be made about the statute."
2. Golden Ocean claims (i) that Trustworth Shipping Pte Ltd ("Trustworth") repudiated a 10 year charterparty dated 2nd February 2008: (ii) that Trustworth had been nominated by SMI as charterers; and (iii) that that the charter was guaranteed by SMI. Golden Ocean claims to have suffered losses of around US $ 54 million by reason of that repudiation and claims that sum against SMI under the guarantee. SMI and Trustworth say that Mr Salgaocar did not have authority to bind them to any contract either of charter or of guarantee, and it is on that account that Mr Salgaocar is sued for breach of warranty of authority to enter into both contracts on behalf of SMI and Trustworth.
3. Until very shortly before the hearing of the application the defendants claimed that there was no serious issue to be tried that Mr Salgaocar had authority, whether actual or ostensible, to contract on behalf of SMI. However, in late October, following disclosure ordered by Walker J of a number of previous fixtures, the defendants (first Mr Salgaocar, and then SMI) indicated that they would not be making that claim on the present application. There is, accordingly, and as I find, an arguable case that he did have such authority. I am also satisfied that there is, as the defendants also accept, an arguable case that he had authority to act on behalf of Trustworth. I shall, therefore, proceed, for the purposes of this judgment upon the assumption (without deciding) that Mr Salgaocar had authority to act on behalf of those two companies.
4. SMI is a private family company. As at February 2008 Mr Salgaocar's shareholdings gave him ultimate control of about 82.5% of its shares. Members of his immediate family held a further 6.5% of the shares directly. Under the Articles of Association Mr Salgaocar had power to appoint and remove one third of the Board of Directors. Throughout 2008 SMI's website described SMI as a leading conglomerate of industries led by Mr Salgaocar. It featured a formal photograph of Mr Salgaocar with his two sons, Sameer and Arjun Salgaocar, who were described as directors of the company. Under the photograph were the words "Anil V. Salgaocar Chairman & Managing Director, Salgaocar Mining Industries Pvt. Ltd (Center)". Mr Salgaocar had, according to Mr Gautam Radia, his son-in law who is an authorised signatory of SMI, "...guided the fortunes of SMI for approximately 30 years..."
5. In fact Mr Salgaocar resigned as a director of SMI on 31st March 2006. Thereafter his two sons appear to have been the only directors even though Article 113 (b) of SMI's Articles of Association requires there to be a multiple of 3 directors.
6. The website described SMI as being in the business of mining and exporting iron ore worldwide. Mr Salgaocar and SMI had extensive dealings with shipbrokers, Howe Robinson & Co Ltd ("Howe Robinson"). The main contact at Howe Robinson was Mr Guy Hindley ("Mr Hindley") who was based in London. Mr Hindley generally acted on the oral instructions of Mr Salgaocar which Mr Hindley confirmed by email to him."
7. On 3rd January 2008 Mr Hindley e-mailed Mr Salgaocar to tell him of the availability, from the 4th quarter of 2009, of a number of new buildings for purchase from the Jinhaiwan yard, including 176,000 dwt Capesize bulkers. In the event negotiations began in early January 2008 between Golden Ocean and SMI for a 10 year charter of a Capesize new building expected to be delivered in October 2009.
8. Golden Ocean were the Owners of the subject vessel. The individuals concerned on their behalf were Mr Anders Zorn, Mr Jens Martin Jensen and Mr Jon Flaaten. Howe Robinson were their brokers as well. The individuals at Howe Robinson who acted for Golden Ocean were Mr Bernd Hintz and Mr Daniel Hall.
9. On 8th January 2008 Golden Ocean offered to charter to SMI or an account to be guaranteed by SMI, a vessel described as "Golden Ocean Newbuilding Capesize Bulk Carrier Newbuilding ex Jinhaiwan, China", at $ 42,500 daily for 10 year 2 months more or less at charterers' option with an option to purchase at the end of the charter period at US$ 93 million. SMI countered at $ 40,000 per day and $ 85 million for the purchase price "a/c Trustworth Pte Limited Singapore fully guaranteed by Salgaocar Mining Industries Goa". That offer was "- subject all further terms + details - subject owners board approval - subject charts reconfirmation to be lifted latest 5 working days after owners board approval lifted".
10. The disclosure ordered by Walker J herein has revealed that since 2005 Howe Robinson has fixed around 125 vessels on Mr Salgaocar's instructions with Trustworth as charterers. In 43 of those fixtures Trustworth was guaranteed by SMI. Four of those fixtures post dated the fixture in issue in the present case. Of those 43 fixtures 36 involved guarantees in the same form as in the present case namely by a single line in the charterparty. In January and February 2008 Howe Robinson concluded 15 other fixtures on Mr Salgaocar's instructions, three of which were guaranteed by SMI.
11. Trustworth is a Singaporean company which, Golden Ocean claims, was used for tax reasons and because Indian foreign exchange regulations make it difficult to remit foreign currency abroad. The evidence indicates that it was, in effect, the chartering arm of SMI. Its use appears to have been in order to distance the charter from India.
12. The negotiations proceeded on the basis of the charterers being "Trustworth fully guaranteed by SMI". They were conducted by e-mail, by which Messrs Hintz and Hall of Howe Robinson communicated with Messrs Zorn, Flaaten and Jensen of Golden Ocean; Mr Hindley of Howe Robinson communicated with Mr Salgaocar, and the Howe Robinson brokers communicated with each other.
13. On 10th January 2008 Mr Hindley e-mailed Mr Salgaocar to tell him that he had managed to get Owners to confirm the last offer he had made so "we are agreed on everything except subjects". Mr Hintz e-mailed to Mr Zorn of Golden Ocean to the same effect the next day.
14. At 17.56 on 11th January 2008 Mr Hindley e-mailed to Mr Salgaocar, and at 19.40 Mr Hintz e-mailed to Mr Zorn recaps of the fixture in the same terms which included "- subject all further terms Owners nype/moa - subject Owners board approval to be lifted latest 1700 hours London on Monday 14th January 2008 - subject to Charterers approval to be lifted latest 1700 hours on Tuesday 15th January 2008". The recap was, as before, "A/c Trustworth Pte Limited Singapore fully guaranteed by Salgaocar Mining Industries Goa". These recaps followed agreement on the charterparty terms in e-mails passing between Mr Hintz and Mr Hindley.
15. The "approval" subjects were lifted on 14th and 15th January, leaving for negotiation the details of the NYPE charter and of the MOA for the purchase, if the option was exercised.
16. On 2nd February Mr Flaaten of Golden Ocean replied to an e-mail of Mr Hintz setting out charterers' proposal on the last outstanding points: "Agreed to the below and therefore fully fixed".
17. On 4th February Mr Hindley e-mailed to Mr Salgaocar "Pleased to confirm we have fixed subject to agreeing mutually acceptable terms on the MOA as follows…" and then set out a recap including the agreed charterparty terms. Mr Hintz e-mailed in the same terms to Mr Flaaten. The recaps were dated 2nd February 2008.
21st February The alleged making of the contracts
18. On 21st February at 12.30 am Mr Hall e-mailed to Mr Jensen of Golden Ocean the charterers' proposed MOA terms. These included the following additional clause:
"Throughout this Charter Charterers are to be given access to all Drydock, damage, Port State Control reports and Charterers authorised representatives are to be granted access to visit vessel whether in the yard, drydock or in port"
19. At 09.00 Mr Jensen e-mailed to Mr Hall "All ok – except re deposit-say 5 days" (a reference to the time for provision of the deposit after declaration of the purchase option) and suggested that the additional clause suggested by the charterers belonged in the charterparty.
20. Mr Hall forwarded that 09.00 e-mail to Mr Hindley in the following terms:
"Following back from Golden Ocean on the MOA
In the end I did not mention anything about pulling the tail shaft to them, as on reviewing the VLCC we did with them it was in there …anyway they agree to all Salgaocar's changes except deposit which I think quite right – do you know if it is already drawn up. If not suggest we put it in or otherwise do an addendum. Deposit seems very fair especially considering Salgaocar has the option on when to exercise.
Can I confirm this?"
That e-mail crossed the line between Mr Hall as broker for Golden Ocean and Mr Hindley as broker for SMI/Mr Salgaocar.
21. To that e-mail Mr Hall received a reply from Mr Hindley:
"YES. CONFIRM THE 5 DAYS THAT'S FINE.
CD U SEND ME RECAP – WITH TODAYS DATE?
SUGGEST TO GOLDEN OCEAN WE AGREE THE SAME DATE FOR C/P
CAN YOU GET ADDITIONAL CLAUSE PUT IN C/P AS DON'T THINK SAME HAS BEEN DRAWN UP YET THOUGH HAPPY FOR IT TO BE AN ADDENDUM
I'M RATHER HOPING WE CAN AGREE THAT VESSEL IS GOLDEN BEIJING AS SALGAOCAR LIKED THE NAME!
THANKS V. MUCH"
22. Mr Hall then e-mailed Mr Jensen in response (on the e-mail thread) to his 09.00 e-mail (see para 19 above):
"Many thanks yours - we are all done!
Charterers confirm ok to change deposit to within 5 days. Also will put the inspection clause in the C/P (or as an addendum).
Can we make the C/P and MOA today's date? (Or have you already announced this deal?)
Also can we tell/confirm to Salgaocar that the Vessel will be the M.V. Golden Beijing?"
23. On 21st February 2008 Mr Hall e-mailed to Golden Ocean a recap of the MOA.
24. At some date after 17th July 2008 Howe Robinson drew up a charterparty between Golden Ocean and "TRUSTWORTH SHIPPING PTE LIMITED. . . Charterers of SINGAPORE fully guaranteed by SALGAOCAR MINING INDUSTRIES, GOA". The pages of the amended NYPE form (but not the attached riders) have Howe Robinson's stamp on them. At the end of the NYPE form appears the following:
For the Owners
GOLDEN OCEAN GROUP LIMITED, BERMUDA
By e-mail authority received from
GOLDEN OCEAN MANAGEMENT AS
Dated 17th July 2008
For and on behalf of
HOWE ROBINSON SHIPBROKERS, LONDON
As Broker Only."
25. There is no reference to the guarantee or the guarantors in the e-mail correspondence and the working copy of the charter other than in the description of the Charterers. The copy of the charter referred to in para 24 was never signed.
26. On 16th September 2009 Mr Salgaocar's secretary e-mailed to Mr Hindley a note from Mr Salgaocar in which he asked Mr Hindley to specify to Owners that the quantity of bunkers required on delivery should be sufficient for the vessel to arrive in Hong Kong where further bunkering would take place up to Singapore and thereafter at Singapore for a voyage Singapore – Goa – Singapore. He asked Owners to calculate the bunkers required and for them to arrange to paint "SALGAOCAR" on both sides of the hull and to mark "S" on the funnel in accordance with a logo which was enclosed.
27. On 30th September Golden Ocean declared to Charterers that the vessel named "Golden Future" would be delivered to Charterers pursuant to the 2nd February 2008 charter and that she would be delivered on/about mid November, say 17 November. Mr Hindley passed this declaration on to Mr Salgaocar together with notification that Owners had agreed to the painting requests at Charterers' cost and that Owners had asked technical staff about bunkers to Goa.
28. On 28th October 2009 Mr Hintz passed on a message he had received from Mr Hindley that "with changes in the group etc. . the one thing they do not rpt do not want is any Salgaocar markings on the vessel" and that Golden Ocean should go ahead and put their own markings on the hull and funnel.
29. On 4th December Owners gave Charterers 30 days approximate notice of delivery of the "Golden Future" for 5th January 2010. On 15th December Owners gave 20 days approximate notice of delivery for that date.
30. On 8th December 2009 Mr Rohit Mathrani, a director of Trustworth wrote to Mr Hindley stating "once again" that there was no guarantee made available by SMI and that Trustworth was unable to proceed further with the Charter Party.
31. On 16th December 2009 Mr Mathrani e-mailed to Mr Kerr-Dineen, the joint chairman of Howe Robinson to say that there was "no Charter Party between [Trustworth] and [Golden Ocean]". Mr Hintz forwarded that e-mail to Mr Zorn that day and expressed "our total surprise at the denial of the existence of a charterparty". Mr Hintz referred to the large number of fixtures which Howe Robinson had concluded for Trustworth and another company linked to SMI, saying that "our authority for fixing all these ships (numbering in total close to some 250 fixtures) came directly and solely from Mr A V Salgaocar and the negotiation and handling of the present fixture was handled in the same manner". He referred to a number of changes in the Salgaocar group, the division of Mr Salgaocar's time between his business and his duties as a member of the Goan assembly and to his declining health, and to the fact that control of the business appeared to be being passed to his family and in particular his two sons, daughter and son-in-law. He also set out a message that had been sent by Mr Kerr-Dineen to Mr Mathrani which included the statement that:
"this charter was concluded on behalf of trustworth in accordance with authority we received from mr Salgaocar. Mr Salgaocar also confirmed that the charter was fully guaranteed by Salgaocar Mining Industries, GOA. This is the basis on which the vessel was fixed."
32. Trustworth reiterated its denial of a charter and a guarantee in an e-mail of 23rd December 2009 to Ince & Co, in response to a letter from Ince to SMI of 22nd December asserting the existence of both. On 24th December 2009 Ince & Co wrote to Trustworth treating its conduct as a renunciatory breach of the charterparty which Golden Ocean accepted.
33. On 23rd December Golden Ocean had threatened to issue a press release stating that Trustworth had failed to honour its obligations under the charter and had stated without justification that there was no contract or guarantee; and that Golden Ocean would pursue a claim for damages and arrest Trustworth and SMI assets if Trustworth did not confirm by midnight that it would take the vessel. This produced a response from SMI dated 24th December warning Golden Ocean against issuing the press release and reiterating that it had entered into no contract of guarantee with Golden Ocean nor authorised anyone to provide such a guarantee on their behalf."
i) The claims against both SMI and Mr Salgaocar were made in respect of contracts governed by English law (CPR PD6B, para 3.1(6) (c)).
ii) In relation to Mr Salgaocar, a claim has been made against SMI, and there was between Golden Ocean and SMI a real issue which it was reasonable for the court to try, and Mr Salgaocar was a necessary or proper party to that claim (CPR PD6B para 3.1(3)).
iii) The claims had a reasonable prospect of success and England was the proper place to bring the claims.
i) a binding charterparty was concluded between Golden Ocean and Trustworth;
ii) Mr Salgaocar had authority to bind Trustworth;
iii) Mr Salgaocar had authority to bind SMI to a guarantee;
iv) the guarantee if there was one is governed by English law as a result of the express choice of law in the charterparty, which additionally contained a London arbitration clause.
1) There is no single document which can be identified as the contract of guarantee.
2) The final email sent on 21 February 2008 set out by the judge at paragraph 21 of his judgment reproduced above, which for convenience I will identify as did the parties at the hearing as page B106, although more accurately the last message recorded at the top of that page, is not itself a contract of guarantee but simply brings into effect a guarantee, doing so by operation of law, because of the extent of the antecedent agreement as to a charterparty and the removal of the condition to an agreement becoming binding, the conclusion of a mutually acceptable MOA pursuant to which the charterers could at their option purchase the vessel.
3) The email at B106 does not refer to any of the terms of the guarantee - nor even save inferentially to its existence.
4) The email at B106 contemplates the creation of a future instrument, a formal charterparty document, which will be the one instrument comprising a contract of guarantee which alone satisfies the statutory requirement for an agreement in writing.
5) The email at B106 is not signed. It contains no more than a salutation from Mr Hindley to Mr Hall.
6) Even if B106 is signed, Mr Hindley had no authority to sign a contract of guarantee.
"Contracts for sale etc. of land to be made by signed writing.
(1) A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each.
(2) The terms may be incorporated in a document either by being set out in it or by reference to some other document.
(3) The document incorporating the terms or, where contracts are exchanged, one of the documents incorporating them (but not necessarily the same one) must be signed by or on behalf of each party to the contract."
There are two obvious points to be made. First, section 4 of the Statute contains no similar language requiring all the terms of the contract to be incorporated in one document. Secondly, the purity of this requirement is in any event compromised by sub-section (2) which permits incorporation of all the terms by reference to some other document.
"A/C Trustworth Shipping Pte Ltd Singapore fully guaranteed by Salgaocar Mining Industries Goa."
followed by the rubric:-
"otherwise terms as per Channel Navigator Cp dtd 21.4.2005 with logical alterations and the following amendments . . ."
There then followed a further list of amendments to both the main body of the charterparty, which was on the New York Produce Exchange form, and to the numbered rider clauses. The charterparty, if there was one, remained in precisely this form, subject only to the agreement to add the clause which was agreed on 21 February concerning charterers' access to dry dock, damage and Port State Control reports and which it was further agreed belonged more appropriately in the charterparty than in the MOA.
"Charterers performance to be guaranteed by Messrs Shirlstar Container Transport Ltd of London as follows: the below quoted letter is to be issued by Messrs Shirlstar Container Transport Ltd of London on their own letter paper and it to be signed by Sir Benjamin Slade or a senior officer who is authorized to enter into binding contracts on behalf of Messar Shirlstar Container Transport Ltd of London."
Then the recap proceeded to set out the terms of a letter of guarantee. A formal charterparty was drawn up some days later, but dated, in accordance with normal practice, 24 December 1983.
"Fourthly Mr. Steinfeld submits that since it was contemplated that the guarantee would be in writing, no binding contract was concluded until that should occur, which it never did. It is clearly correct that the guarantee was to be in writing –
. . . on Shirlstar letter paper signed by Sir Benjamin Slade or a senior officer.
The question is whether there could be a binding oral contract to issue such a guarantee. Mr. Steinfeld relied on the judgment of Lord Greene, M.R. in Eccles v. Bryant and Pollock,  Ch. 93 at p. 99:
When parties are proposing to enter into a contract, the manner in which the contract is to be created so as to bind them must be gathered from the intention of the parties express or implied. In such a contract as this there is a well-known, common and customary method of dealing; namely by exchange . . .
The contract in that case was for the sale of a house. For my part I consider that further assistance is to be derived from the classic statement of Mr. Justice Parker in Von Hatzfeldt-Wildenburg v. Alexander,  1 Ch. 284 at p. 288:
It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of a further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract. In the latter case there is a binding contract and the reference to the more formal document may be ignored. The fact that the reference to the more formal document is in words which according to their natural construction import a condition is generally, if not invariably, conclusive against the reference being treated as the expression of a mere desire.
By the word condition, I think that the Judge meant a condition precedent to the formation of a binding contract.
In applying those principles to the present case, it seems to me of paramount importance that Mr. Sorensen and Mr. Bott were in the process of negotiating a charter-party. That too, it was contemplated, would be incorporated in a formal written document. But it is not argued that the charter-party would not be binding forthwith, once all its terms had been agreed. Mr. Steinfeld expressly disclaimed any such contention; and as I have already said, I cannot recall any case where it has been put forward in the last 25 years.
Against that background, how can it have been the intention of the parties that the owners should be bound by the charter-party as soon as all the terms were agreed, but that Shirlstar would not be bound by their promise unless and until they executed a formal written document? Mr Steinfeld suggests that the owners would have been entitled to treat the charter-party as repudiated if a formal written guarantee were not provided promptly. That may well be right; but I am quite satisfied that, on a true interpretation of the bargain, it was not their only protection. The offer of Mr. Bott on behalf of Shirlstar was to execute a guarantee in the form required; and that offer became binding as a contract, once the owners accepted it by agreeing with the charterers on the remaining terms of charter-party."
"Even then it may be said that the two later documents do not contain all the terms (or all the material terms, if that be the test) of the contract – for example because they make no mention of English law and jurisdiction. But the first telex of Jan. 6 in turn refers to "the letter of guarantee". It seems to me consistent with the cases on express or implicit reference in one document to another to take that as a reference to the telex of Dec. 23. That document did contain the full terms of the contract, save that it named the charterers as Transaltic and omitted the date of the charter-party. It is not said to have been signed by Shirlstar. Nevertheless I consider that the three telexes together, with the possible addition of the actual charter-party, form a sufficient note or memorandum. The last was signed by Shirlstar, and references can be traced back from it to each of the others. So in my judgment there is a sufficient note or memorandum."
"57. I do not accept that, if an agreement has been made in writing, there is some limit to the number of documents to which reference is permissible. If there is said to have been an agreement in writing the Court is entitled to look at those documents which are said to constitute the agreement, however many they may be. In contracts made in the manner in which the present contracts are said to have been made, that involves looking at more than two documents (one of offer and one of acceptance), both because the terms of the charterparty and of the memorandum of agreement were negotiated sequentially and because, in negotiations of the "Accept/except" type the last offer, which may only except one small item (such as whether a sum should be paid in 7 as opposed to 5 days), will not be intelligible without reference to the preceding offers and counteroffers."
I agree with the judge. Furthermore I consider that his conclusion is not simply "well arguable" but also correct and that we should so decide. I do not consider that his conclusion frustrates the purpose of the Statute. The purpose of the Statute is not, as Mr Kendrick submitted, to prevent the court considering continuing negotiations. The purpose of the Statute is rather, in part, to prevent the court having to resolve disputes as to oral utterances. In the present case it is in fact necessary to look at very few documents, arguably only two, in order to identify a clear agreement. Subject to Mr Kendrick's other points and subject to proof of authority at trial, it would I think be a serious blot on our commercial law if SMI could here avoid liability because its obligation is to be found written in two documents rather than in one.
"But here the authority was not a general authority at all, but an authority to forward to the plaintiff's advisers certain particular documents. And although the defendant may not have been contemplating that those documents would form a note or memorandum of the contract sufficient to satisfy the Statute of Frauds (indeed nothing could have been further from his thoughts), that did not in my judgment invalidate the authority to forward the documents, or prevent all those legal consequences flowing from the forwarding which would undoubtedly have flowed from it had the defendant forwarded the statements himself and signed the letters enclosing them. It seems to me that the unintentional by-product of satisfying the Statute of Frauds may be produced as completely by a note or memorandum signed by an agent of the party as by a note or memorandum signed by the party himself, provided, of course, that the agent had authority to sign the particular note or memorandum."
"My Lords, it is standard practice, when two brokers, acting on behalf of their respective principals, negotiate by telephone or telex or both, the terms on which a ship is to be chartered, and terms are fully agreed, for those terms to be embodied in a written charterparty in which they are subsumed. It seems to me to be clear that Tramp and Marti intended to follow this standard practice in the present case, not only in respect of the terms of the main contract between the owner and charterers, but also in respect of the terms of the collateral contract of guarantee between the owners and Marti. The question is, however, whether, so far as the collateral contract of guarantee between the owners and Marti is concerned, the two brokers achieved the result intended. That question arises because Marti have raised what the Court of Appeal regarded, rightly in my view, as an arguable case, that all the signatures affixed by Marti to the pages of the charterparty, including the page containing clause 24, were affixed by them solely as agents of the charterers and not also for themselves as a contracting party.
In these circumstances it is necessary, in order to decide whether the owners can enforce the agreement of guarantee against Marti, to consider that question on two alternative assumptions. The first assumption is that Marti affixed their signature to the page of the charterparty containing clause 24 as a contracting party. The second and alternative assumption is that every signature affixed by Marti to the charterparty, including the signature on the page containing clause 24, was affixed by them solely as agents for the charterers.
I consider the case, first, on the assumption that Marti signed the page of the charterparty containing clause 24 as a contracting party. On that assumption, the prior oral agreement of guarantee was subsumed in the written agreement contained in clause 24. The latter agreement, moreover, was signed by Marti on their own account. In the result there was, on the first assumption, a written agreement of guarantee signed by the party to be charged therewith, so as to render that agreement enforceable by the owners against Marti in the first of the two ways of achieving enforceability prescribed by section 4 of the Statute of Frauds.
I consider the case, secondly, on the alternative assumption that every signature affixed to the charterparty by Marti, including that on the page containing clause 24, was affixed by them solely as agents for the charterers. On that assumption, Marti were not parties to the charterparty at all, and the prior oral agreement of guarantee between the owners and Marti was never subsumed in clause 24 of the charterparty but remained intact as when it was first made. The question then arises whether clause 24 of the charterparty constituted a memorandum or note of that prior oral agreement signed by Marti, so as to make that agreement enforceable by the owners against Marti in the second of the two ways of achieving enforceability prescribed by section 4.
My Lords, there were cited to your Lordships in the course of argument a considerable number of cases in which the courts have had to consider and decide what does or does not constitute a sufficient memorandum or note of an agreement of guarantee signed by the party to be charged for the purposes of section 4. I do not propose, however, to refer to more than one of those cases, In re Hoyle  1 Ch. 84, in which it seems to me that the basic principle relevant to the present case was shortly and in my view correctly explained by A. L Smith L. J. He said, at p. 100:
"The statute enacts that no action shall be brought upon a promise of a certain description unless there is a note or memorandum thereof signed by the party to be charged. A letter to a third party has been held enough; an affidavit made in a different matter has been held to suffice; and I should say that an entry in a man's own diary, if it were signed by him and the contents were sufficient, would do. The question is not what is the intention of the person signing the memorandum, but is one of fact, viz., is there a note or memorandum of the promise signed by the party to be charged? Here the testator by his will, which he signs, recites the guarantee sued on. The contents of the statement are sufficient, and why is this not a memorandum in writing signed by the party to be charged? I say that it is."
I would refer also to similar statements of principle made by Lindley L.J., at p. 98.
Applying the statements of principle made in In re Hoyle above to the present case, it seems to me to be wholly irrelevant, in relation to the question which I am now considering, with what intention, or in what capacity, Marti signed the page in the charterparty containing clause 24, whether as agents for the charterers only or for themselves as well. Clause 24 contained all the terms of the prior oral agreement of guarantee and Marti's signature was affixed to the page containing that clause. On those facts the page of the charterparty concerned contained, in my opinion, a sufficient memorandum or note of the prior oral agreement of guarantee signed by the party to be charged, so as to satisfy the second requirement for achieving enforceability prescribed by section 4. It follows from what I have said that I consider, with great respect to the Court of Appeal, that they were in error in treating the issue of the intention with which, or the capacity in which, Marti signed the page of the charterparty concerned, as relevant to, let alone decisive of, the question whether that page contained a sufficient memorandum or note of the prior oral agreement signed by Marti, so as to make that agreement enforceable in the second of the two ways prescribed by section 4. "
The claim for breach of warranty of authority
Freedom of choice
1. A contract shall be governed by the law chosen by the parties. The choice must be expressed or demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case. By their choice the parties can select the law applicable to the whole or a part only of the contract.
(1) To the extent that the law applicable to the contract has not been chosen in accordance with Article 3, the contract shall be governed by the law of the country with which it is most closely connected. . . .
(2) Subject to the provisions of paragraph 5 of this Article, it shall be presumed that the contract is most closely connected with the country where the party who is to effect the performance which is characteristic of the contract has, at the time of conclusion of the contract, his habitual residence. . . .
(3) Notwithstanding the provisions of paragraph 2 of this Article, to the extent that the subject matter is a right in immovable property or a right to use immovable property it shall be presumed that the contract is most closely connected with the country where the immovable property is situated.
(4) A contract for the carriage of goods shall not be subject to the presumption in paragraph 2. In such a contract if the country in which, at the time the contract is concluded, the carrier has his principal place of business is also the country in which the place of loading or the place of discharge or the principal place of business of the consignor is situated, it shall be presumed that the contract is most closely connected with that country. In applying this paragraph single voyage charter-parties and other contracts the main purpose of which is the carriage of goods shall be treated as contracts for the carriage of goods.
(5) Paragraph 2 shall not apply if the characteristic performance cannot be determined, and the presumptions in paragraphs 2, 3 and 4 shall be disregarded if it appears from the circumstances as a whole that the contract is more closely connected with another country."
"In this case the contract usually arises by implication, but it is not likely to contain a choice of law, and it is not easy to see a characteristic performance or equivalent for it. It will presumably often come within the residual provisions of Articles 4.3 or 4.4 and as it is clearly a contract ancillary to the proposed contract between principal and third party, albeit such a contract did not come into force, it would seem that it should be governed by that law, or what it would have been, by attraction."
"This Article does not permit the court to infer a choice of law that the parties might have made where they had no clear intention of making a choice. Such a situation is governed by Article 4."
However, I note that immediately before this passage we find:-
"Other matters that may impel the court to the conclusion that a real choice of law has been made might include an express choice of law in related transactions between the same parties . . ."
Whilst I doubt whether the authors had in mind specifically a contract of warranty of authority, what is there said is in my judgment of direct application to the situation under consideration. For my part I think that Article 3 is engaged. I think that the unusual circumstances of this implied contract demonstrate with reasonable certainty a choice that it should be governed by the same law as the proposed principal contract to which it is ancillary. However I consider that the same result can be achieved by application of Articles 4.1 and/or 4.5.
"133. I do not accept Mr Kimmins' submission that the characteristic performance of a warranty of authority contract is the provision of the warranty. The provision of the warranty is the promise, not the performance of it. A person who warrants his authority warrants that a state of affairs exists. The warranty is fulfilled if he has the authority which he claims to have. It is a somewhat curious use of language to describe that as a performance effected by the warrantor, an expression more easily applicable to a physical act. But since, in essence, the warrantor agrees to see to it that he has authority, he can properly be regarded as the party who is to effect the performance which is characteristic of the contract. In addition there is no one other than Mr Salgaocar who can be said to perform the contract. Accordingly the contract is to be presumed to be most closely connected with India, Mr Salgaocar's habitual residence.
134. The next question is whether it appears from the circumstances as a whole that the contract whereby Mr Salgaocar warranted his authority is more closely connected with England. Golden Ocean submits that that is so because English law was to govern the guarantee and charterparty, which, had he had authority, would have been concluded between Mr Salgaocar and his apparent principals. There is an express choice of English law in the charterparty, which also contains the guarantee. Golden Ocean supposed itself to be contracting with SMI for the provision to it of a guarantee to be governed by English law. It was entitled to expect that the question of Mr Salgaocar's warranty of authority should be determined by the system of law by reference to which he was negotiating the contract in respect of which he purported to act as agent.
135. Such an approach seems to me to fall foul of the observations of Hobhouse LJ (with whom the rest of the Court agreed) in Credit Lyonnais v New Hampshire  2 Lloyd's Rep 1 in connection with the provisions of sections 2 (2), (3) and (4) of Schedule 3 A of the Insurance Companies Act 1982, which were similar in terms to sections (1), (5) and (2) of article 4 of the Rome Convention, when he said [p 7]:
"I accept the defendants' submission that once it is seen that there is no choice of applicable law satisfying par. 2 (i) of the schedule, the question of choice and absence of choice becomes irrelevant to the question of ascertaining with what State the contract is most closely connected. Similarly to refer to the contemplation by one party or another that certain local laws may or may not be relevant is to be influenced by considerations of inferred choice and connection with legal systems and not with the question of performance and the location of performing parties."
This passage was quoted with approval in Samcrete Egypt Engineers and Contractors S.A.E. v Land Rover Exports Ltd  EWCA Civ 2019.
136. In the present case any contract whereby Mr Salgaocar warranted his authority to act for SMI seems to me more closely connected with India, where he and SMI resided and where he would secure the necessary authority from SMI. Further Indian law is the law which governs the relationship between SMI and Mr Salgaocar; and the claim for breach of warranty of authority only arises if there is no valid contract (under any law) between Golden Ocean and SMI. At any rate Golden Ocean has not persuaded me that it has much the better argument on this point; that distinction belongs to the defendants.
137. Accordingly I would not allow the permission to serve Mr Salgaocar out of the jurisdiction to stand on the basis that any warranty of authority contract was governed by English law."
"Identifying the characteristic performance of a contract obviously presents no difficulty in the case of unilateral contracts."
Again, I doubt if the authors had in mind specifically the contract of warranty of authority. I would therefore regard Article 4.1 as engaged. The presumption in Article 4.2 does not apply because the characteristic performance cannot be determined – Article 4.5. I would hold England to be the country with which the contract is most closely connected. I recognise that Article 4 is couched in terms of performance and the location of performing parties, not legal systems – cf the observations of Hobhouse LJ in Credit Lyonnais set out by the judge at paragraph 135. Again however I respectfully doubt whether these observations, or those of the Court of Appeal in Samcrete, were directed towards the special and perhaps unique case of the warranty of authority which arises by implication in connection with the negotiation of a contract intended to be governed by English law, capable of giving rise to a contractual obligation when relied upon by the apparent conclusion of such a contract. Where additionally the principal contract is negotiated through London brokers on both sides and is, if made, subject to arbitration in London, it is not I think an impermissible approach to Article 4 to regard both that contract and the contract ancillary thereto as being more closely connected with England than with any other country. Indeed, in respectful disagreement with the judge, I do not consider that either India or Indian law has any relevant connection with the contract whereby Mr Salgaocar warranted his authority to act on behalf of SMI (or Trustworth). Whilst Indian law no doubt governs the relationship between SMI and Mr Salgaocar, it is only in the event that pursuant to that law Mr Salgaocar lacked authority that his warranty of authority becomes relevant. That warranty of authority is an implied incident of a negotiation directed to the formation of a contract governed by English law. The offer is accepted by apparently concluding with the warrantor's principal a contract governed by English law. The connection is therefore exclusively with England and English law.
"59. It thus follows from the Giuliano and Lagarde report that the objective of article 4(5) is to counterbalance the set of presumptions stemming from the same article by reconciling the requirements of legal certainty, which are satisfied by article 4(2) to (4), with the necessity of providing for a certain flexibility in determining the law which is actually most closely connected with the contract in question.
60. Since the primary objective of article 4 is for there to be applied to the contract the law of the country with which it is most closely connected, article 4(5) must be interpreted as allowing the court before which a case has been brought to apply, in all cases, the criterion which serves to establish the existence of such connections, by disregarding the "presumptions" if they do not identify the country with which the contract is most closely connected.
61. It therefore falls to be ascertained whether those presumptions may be disregarded only where they do not have any genuine connecting value or where the court finds that the contract is more closely connected with another country.
62. As is apparent from the wording and the objective of article 4 of the Convention, the court must always determine the applicable law on the basis of those presumptions, which satisfy the general requirement of foreseeability of the law and thus of legal certainty in contractual relationships.
63. However, where it is clear from the circumstances as a whole that the contract is more closely connected with a country other than that identified on the basis of the presumptions set out in article 4(2) to (4) of the Convention, it is for that court to refrain from applying article 4(2) to (4).
64. In the light of those considerations, the answer to the fifth question must be that article 4(5) of the Convention must be construed as meaning that, where it is clear from the circumstances as a whole that the contract is more closely connected with a country other than that determined on the basis of one of the criteria set out in article 4(2) to (4) of the Convention, it is for the court to disregard those criteria and apply the law of the country with which the contract is most closely connected."
Sir Mark Waller :
Lord Justice Rix :
Note 1 Special provision had by then been made for the sale or other disposition of an interest in land, where in any event the doctrine of part performance had to some extent mitigated the mischief to which the Statute had given rise – the defeat of commercial expectations by the lack of a written memorandum or note of an oral agreement – seeActionstrength, per Lord Bingham at page 545. [Back] Note 2 Mr Hindley’s e-mail to Mr Salgaocar of 8th January 2008 [C/1-2] refers to “account to be guaranteed by [SMI]”. Mr Hintz’s e-mail of 9th January to Golden Ocean [C/3-4] refers to his having “offered to chars – account to be guaranteed by [SMI]”. The e-mail to Mr Hindley does not appear to be in the papers. [Back] Note 3 In Samcrete Egypt Engineers v Land Rover Exports Ltd (see para 135) the Court of Appeal held that there was no room for doubt that the obligation characteristic of the performance of a guarantee (which is somewhat analogous to a warranty of authority) was the payment of money by the guarantor (para 38). The Giuiliano and Lagarde Report is to the same effect (see para 36 of the judgment). The Court also held that in the absence of an express or inferred choice of law under Article 3, the Article 4 (2) presumption should only be disregarded in circumstances which clearly demonstrated the existence of connecting factors justifying the disregard of the presumptions in Article 4 (2). [Back]
Note 1 Special provision had by then been made for the sale or other disposition of an interest in land, where in any event the doctrine of part performance had to some extent mitigated the mischief to which the Statute had given rise – the defeat of commercial expectations by the lack of a written memorandum or note of an oral agreement – seeActionstrength, per Lord Bingham at page 545. [Back]
Note 2 Mr Hindley’s e-mail to Mr Salgaocar of 8th January 2008 [C/1-2] refers to “account to be guaranteed by [SMI]”. Mr Hintz’s e-mail of 9th January to Golden Ocean [C/3-4] refers to his having “offered to chars – account to be guaranteed by [SMI]”. The e-mail to Mr Hindley does not appear to be in the papers. [Back]
Note 3 In Samcrete Egypt Engineers v Land Rover Exports Ltd (see para 135) the Court of Appeal held that there was no room for doubt that the obligation characteristic of the performance of a guarantee (which is somewhat analogous to a warranty of authority) was the payment of money by the guarantor (para 38). The Giuiliano and Lagarde Report is to the same effect (see para 36 of the judgment). The Court also held that in the absence of an express or inferred choice of law under Article 3, the Article 4 (2) presumption should only be disregarded in circumstances which clearly demonstrated the existence of connecting factors justifying the disregard of the presumptions in Article 4 (2). [Back]