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England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Sino Channel Asia Ltd v Dana Shipping and Trading PTE Singapore & Anor  EWHC 1118 (Comm) (20 May 2016)
Cite as:  WLR(D) 291,  EWHC 1118 (Comm),  Bus LR 778
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QUEEN'S BENCH DIVISION
Fetter Lane, London, EC4A 1NL
B e f o r e :
| SINO CHANNEL ASIA LTD
|DANA SHIPPING AND TRADING PTE SINGAPORE
DANA SHIPPING AND TRADING SA
Chirag Karia QC (instructed by Holman, Fenwick Willan LLP) for the Defendants
Hearing date: 20 April 2016
Crown Copyright ©
The Hon Sir Bernard Eder:
"72. Saving for rights of person who takes no part in proceedings
(1) A person alleged to be a party to arbitral proceedings but who takes no part in the proceedings may question:
(b) whether the tribunal is properly constituted, or
(c) what matters have been submitted to arbitration in accordance with the arbitration agreement,
by proceedings in court for a declaration or injunction or other appropriate relief."
" a declaration that the [Award]...was made without jurisdiction and is of no effect and an order setting aside the Award accordingly ..."
"(2) He also has the same right as a party to the arbitral proceedings to challenge an award
(a) by an application under section 67 on the ground of lack of substantive jurisdiction in relation to him, or
(b) by an application under section 68 on the ground of serious irregularity (within the meaning of that section) affecting him;
and section 70(2) (duty to exhaust arbitral procedures) does not apply in his case."
In this context I was referred to the judgments of Christopher Clarke J in The Eastern Navigator  1 Lloyd's Rep 537 at - and Walker J in The Prestige  1 Lloyd's Rep 137 at - and -84]. As appears from these cases, one possible view is that s72(1) is primarily intended to deal with the position at an interlocutory stage i.e. before any award has been made; that it has no application once an award has been made; and that, once an award has been made and a party seeks to "challenge" an award and to obtain an order setting it aside, such challenge cannot be made under s72(1) but must be made pursuant to s72(2) of the Act i.e. by an application under s67 and/or s68 of the Act. If that is right, Sino Channel's application under s72(1) would seem to fail in limine. A related issue is whether there are any time limits for bringing such application. That is potentially relevant because, as appears below, Sino Channel's application was issued approximately 11 months after the date of the original Award and seven months or so after the date of the correction to the Award i.e. well beyond the statutory time-limit of 28 days for bringing any application under s67 and/or s68 of the Act.
i) Mr Cai made it clear to Dana that he was a mainland Chinese national, with a passport issued in Shanghai;
ii) Citing visa difficulties, he announced himself to be unable to meet in either Singapore or Hong Kong, as Dana had proposed;
iii) In the context of arranging an invitation letter (required for Dana's representative to enter China), he referred to "a hong kong company named sino channel";
iv) The company name and address he provided for the purposes of the invitation letter was that of Beijing XCty.
v) The invitation letter was on Beijing XCty headed paper. It was signed by Mr Zhou and described Mr Cai as "our representative".
vi) It was clear that Mr Cai was not the ultimate decision maker.
i) On 12 February 2014 he emailed Dana/HFW to the effect it was not good to solve the dispute by arbitration and he would try to persuade "someone important" (presumably Mr Zhou) to accept a new long term agreement.
ii) On 19 February 2014 he emailed Dana/HFW asking for an extension of time to appoint an arbitrator.
iii) On the same day he sent a fax to the arbitrator (Mr Moss) also asking for an extension of time to appoint an arbitrator.
"19. Since Mr Cai had been mentioned on several occasions and seemed to be playing a prominent role in the Award, I asked Mr Zhou about Mr Cai and his role in the Award. Mr Zhou told me that Mr Cai had already left Beijing XCty in late 2014 or early 2015 (I cannot recall the exact time). He could not locate Mr Cai and did not know his whereabouts. Mr Zhou told me that he also did not have notice of the arbitration and that Mr Cai was not authorised to handle arbitration matters. According to Mr Zhou Mr Cai was acting without the authority of Mr Zhou or Beijing XCty. Mr Zhou assured me that he would settle the Award. I heard nothing further from Mr Zhou."
i) Did Mr Cai/Beijing XCty have implied actual authority to receive the notice of arbitration on behalf of Sino Channel ?
ii) Did Mr Cai/Beijing XCty have ostensible authority to receive the notice of arbitration on behalf of Sino Channel ?
Implied Actual Authority
i) Sino Channel's role in the COA was limited to "lending" its name to Beijing XCty by signing the COA. It delegated everything else relating to the COA to Beijing XCty: in Mr Jung's own words "It was not necessary for me or [Sino] to do anything else".
ii) Sino Channel completely delegated the negotiation of the COA to Beijing XCty. Again in Mr Jung's own words, it was not concerned with "who was responsible for the negotiation of the Charterparty [i.e. the COA] [or] how the Charterparty was being negotiated".
iii) Sino Channel never even had any communication with its brokers (Triton) who were negotiating the COA on its behalf, save when sending them the signed COA.
iv) Sino Channel was not concerned with anything following the conclusion of the COA: as Mr Jung explains, Beijing XCty "would not keep me informed of the details and performance of the transactions and I would not ask Mr Zhou anything about these".
v) Even when Sino Channel learnt of "some problems" relating to the COA, it completely delegated the resolution of those problems to Beijing XCty. Thus, Mr Jung states that he "did not pay too much attention" to those problems and apparently did not even ask Mr. Zhou what those problems were.
vi) Like with every other aspect of the COA, Sino Channel delegated the resolution of such disputes entirely to Beijing XCty. I consider this broad proposition further below. However, it is fair to say that so far as the notice of arbitration is concerned (i) Triton have confirmed that, as far as can be remembered, all messages they received regarding the arbitration were passed to "charterers"; and (ii) since Mr Jung's own evidence is that Sino Channel did not receive the initial notice of arbitration at the time, the inference must be that it was passed to Beijing XCty. On this basis, Mr Karia QC submitted that (i) this demonstrated that Sino Channel's own broker (Triton) regarded Beijing XCty as the relevant party to whom the notice of arbitration should be forwarded and (ii) such fact strongly supported the conclusion that Beijing XCty had the necessary implied actual authority.
vii) So complete was Sino Channel's delegation of all matters concerning the COA to Beijing XCty that, even after receiving the adverse Award against Sino Channel, Sino Channel decided to "ignore it" and delegated Beijing XCty to "deal with it".
"76. Service of notices etc
(1) The parties are free to agree on the manner of service of any notice or other document required to be given or served in pursuance of the arbitration agreement or for the purposes of the arbitral proceedings.
(2) If or to the extent that there is no such agreement the following provisions apply.
(3) A notice or other document may be served on a person by any effective means.
(4) If a notice or other document is addressed, pre-paid and delivered by post-
(a) to the addressee's last known principal residence or, if he is or has been carrying on a trade, business or profession, his last known principal business address, or
(b) where the addressee is a body corporate, to the body's registered or principal office,
it shall be treated as effectively served."
i) First, the fundamental requirement is that service should be effected on the relevant party itself, or an agent with actual or ostensible authority to receive service. (Para 39.)
ii) Second, even though s76 may operate in certain respects more flexibly than the CPR court regime for service (in particular, service by email is in principle acceptable), that does not obviate the need for the party itself (or an agent with actual or ostensible authority to accept service) to be served properly. In this context, as in others, "separate corporate personality cannot simply be ignored". (Para 39.)
iii) Third, the requirement is that a party should actually be served, rather than merely become aware that there has been purported service. (Para 40.)
iv) Fourth, a P&I Club will not generally have authority, actual or ostensible, to accept service on behalf of a member, even if it has been given authority to deal with a wide range of matters including e.g. settlement negotiations. (Para 44.)
v) Fifth, the position of a P&I Club in that regard is broadly analogous to that of solicitors, where again "even a wide general authority to deal with a case on behalf of a client will not (without more) translate into authority to accept service of originating process." (Para 44.)
"The representation which creates "apparent" authority may take a variety of forms of which the commonest is representation by conduct, that is, by permitting the agent to act in some way in the conduct of the principal's business with other persons. By so doing the principal represents to anyone who becomes aware that the agent is so acting that the agent has authority to enter on behalf of the principal into contracts with other persons of the kind which an agent so acting in the conduct of his principal's business has usually "actual" authority to enter into."
"I agree entirely with what Diplock L.J. [in Freeman & Lockyer] said that such representation has to be made by a person or persons having actual authority to manage the business. Be it supposed for convenience that such persons are the board of directors. Now there is not usually any direct communication in such cases between the board of directors and the outside contractor. The actual communication is made immediately and directly, whether it be express or implied, by the agent to the outside contractor. It is, therefore, necessary in order to make a case of ostensible authority to show in some way that such communication which is made directly by the agent is made ultimately by the responsible parties, the board of directors. That may be shown by inference from the conduct of the board of directors in the particular case by, for instance, placing the agent in a position where he can hold himself out as their agent and acquiescing in his activities, so that it can be said they have in effect caused the representation to be made. They are responsible for it and, in the contemplation of law, they are to be taken to have made the representation to the outside contractor." (Emphasis added.)
i) In general terms, Sino Channel placed Beijing XCty in the position it did and allowed it to handle all matters relating to the COA, including the resolution of disputes and the receipt of the arbitration notice.
ii) As explained above, it is Mr Jung's own evidence in his 1st and 5th affidavits in the Hong Kong action that Sino Channel completely delegated the negotiation and operation and indeed all aspects save for signing the contract of the COA and all earlier agreements to Beijing XCty. In addition, the affidavits of Dana's witnesses show that Sino Channel allowed Beijing XCty complete control over the COA and allowed it to appoint Mr Cai as "Charterers' guy" under the COA.
iii) On 4 April 2013, prior to the conclusion of the COA, Sino Channel's brokers (Triton) named Mr Zhou (of Beijing XCty) as the relevant contact.
iv) At all times, Triton understood and communicated to Lynx and Dana that Beijing XCty were acting for and on behalf of the charterers, Sino Channel.
v) Sino Channel's brokers (Triton) passed on Mr Cai's contact details at Beijing XCty as Sino Channel's contact to Dana's broker, Mr Stamatiou of Lynx.
vi) On 13 June 2013, Triton wrote to Lynx describing Mr Cai as "CHRTRS GUY".
vii) Indeed, Mr Cai was the only person from Sino Channel's side Mr Stamatiou of Lynx had any dealings with and who Triton advised him represented the charterers; at no point did he receive any indication that Mr Cai was not an employee of Sino Channel or lacked any authority.
viii) Despite the fact that Sino Channel was the contracting party under the COA, Mr Jung had no communications whatsoever with Dana, Sino Channel's contractual counterparty. Instead, Sino Channel delegated all such communications to Beijing XCty and Mr Cai, Dana's sole contact there.
ix) On Sino Channel's own case, their own brokers (Triton) also understood that Beijing XCty and Mr Cai were authorised to receive the notice of arbitration because they forwarded that notice to Beijing XCty.
x) Beijing XCty and Mr Cai therefore appeared to Dana "to be acting on behalf of and with authority from" Sino Channel.
xi) Mr Cai signed himself "Daniel of Sino Channel Asia".
xii) Beijing XCty's Mr Zhou then sent an email inviting Dana's Mr Hodgins to meet with Mr Cai in China.
xiii) That email was sent by Ms Li Xuemei, whose email signature stated "Sino Channel Asia Co. Ltd," and Mr Cai then confirmed that Ms Li was his assistant.
xiv) Mr Cai held a business card naming him as an employee of Bow Steel Limited (an affiliated company/subsidiary of Sino Channel) and his LinkedIn profile showed him to be Bow Steel's Vice President/General Manager.
xv) The Hong Kong address and telephone number shown on Mr Cai's business card are Sino Channel's address and telephone number.
xvi) Various internet business directories show Sino Channel's own Beijing address and telephone number to be those of Beijing XCty.
xvii) Mr Cai refers to himself as "Daniel cai [sic] of Beijing Branch" in correspondence with Mr Jung by Skype.
xviii) Infospectrum's August 2013 and March 2015 reports both record Beijing XCty and Sino Channel as being affiliated companies under common ownership.
xix) All pre-arbitration correspondence and the efforts to resolve the dispute were with Beijing XCty/Mr Cai; Sino Channel did not participate in any way.
"97. The relevant law relating to ratification was largely common ground, although there was some disagreement about the fine detail. The principles may be summarised as follows:
(ii) Where an act is done purportedly in the name or on behalf of another person but without his authority, that person may, by ratifying it, make it as valid and effectual as if it had been done with his authority, whether the person who did the act was exceeding his authority or had no authority at all. Ratification is equivalent to antecedent authority;
(iii) Ratification requires an unequivocal act. Thus although ratification may be express or may be inferred from conduct, the conduct amounting to ratification must amount to "clear evidence that [the principal] adopts or recognises such act or transaction in whole or in part"; see Bowstead paras 2-070 and 2-072-3.
(iv) Ratification is a unilateral act of will. There is no need for ratification to be communicated to the agent or anyone else.
(v) Silence or acquiescence may also amount to ratification, depending on the surrounding circumstances. The principle is stated in Halsbury vol 2(1), para 95:
Although ratification must be clear and must bear distinct reference to the facts of the particular case, it need not necessarily be proved by positive acts of adoption. In certain cases it is sufficient evidence of ratification that the intended principal, having all material facts brought to his knowledge and knowing that he is being regarded as having accepted the position of principal, takes no steps to disown that character within a reasonable time, or adopts no means of asserting his rights at the earliest time possible."
i) It is clear from Mr Jung's own evidence that, when he received the Award on 30 June 2015, he knew (on Sino Chanel's case) that (a) Sino Channel itself had not received the notice of arbitration or participated in the arbitration and (b) only Beijing XCty/Mr Cai had received that notice and had participated in the arbitration on Sino Channel's behalf (on Sino Chanel's case) without authority to do so. In that context, Mr Karia QC relied, in particular, on the evidence of Mr Jung in paragraph 19 of his affidavit which I have already quoted above.
ii) If it had not authorised Beijing XCty to so act and if it did not adopt and recognise Beijing XCty's allegedly unauthorised acts, Sino Channel's obvious and natural reaction would have been to immediately disown Beijing XCty's actions by notifying the Tribunal and Dana and commencing proceedings to set aside the Award. However, Sino Channel did no such thing - even though it had all the Tribunal's contact details (including its email and fax number) and Dana's solicitors' address from the covering letter since 30 June 2015.
iii) Instead, Sino Channel did nothing whatsoever to disown Beijing XCty's allegedly unauthorised actions for a period of 4 months: it did not contact Dana or the Tribunal to repudiate those actions or make any application to the Court to set aside the award. Indeed, Sino Channel went even further by agreeing with Beijing XCty that Beijing XCty would "settle the Award".
iv) It was not until 29 October 2015 almost exactly 4 months later that Sino Channel chose to question the effect of the Award on it by raising Beijing XCty's/Mr Cai's alleged lack of authority and Sino Channel's lack of notice; and Sino Channel did that only because it had learnt of Dana's enforcement proceedings in Hong Kong and wanted to prevent that enforcement.
v) Sino Channel thereby clearly ratified Beijing XCty's and Mr Cai's receipt of the notice of arbitration and their participation in the arbitration on Sino's behalf. In particular, the requirements for ratification by silence and acquiescence set out in SEB Trygg at [97(v)] (quoted above) are satisfied in this case because (i) Mr Jung had "all material facts brought to his knowledge and [knew] that he is being regarded as having accepted the position of principal" when he received the Award on 30th June 2015; but (ii) he took "no steps to disown that character within a reasonable time" and failed to adopt any "means of asserting his rights at the earliest time possible".
vi) This case is a fortiori the decision in Prince v Clark (1823) 1 B. & C. 186; 107 E.R. 70. In that case, the claimant's agent had (with authority) sold the claimant's goods in Calcutta but had then without authority invested the proceeds in sugar. The claimant learnt of the sugar investment on 29 May, but did not locate and notify the agent's agent in England until 7 August, some 2 months and 8 days later. The Court unanimously held that the claimant had ratified the agent's unauthorised investment in sugar by failing to disown the transaction within a reasonable time of learning of it. This was so even though the claimant did not know that the agent had a general agent in London because it was the claimant's duty to make such inquires. Abbott CJ explained that:"The plaintiff certainly was not bound to accept the sugars. It was his duty, however, to notify his rejection of them within a reasonable time after he received intelligence of the purchase".
"23 A person who denies being party to any relevant arbitration agreement has no obligation to participate in the arbitration or to take any steps in the country of the seat of what he maintains to be an invalid arbitration leading to an invalid award against him. The party initiating the arbitration must try to enforce the award where it can. Only then and there is it incumbent on the defendant denying the existence of any valid award to resist enforcement."
Applications under sections 67 and/or 68 of the Act