Grace Shipping Inc. v C. F. Sharp & Company (Malaya) Pte. Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 10 December 1986 |
| Date | 10 December 1986 |
| Docket Number | Privy Council Appeal No 11 of |
| Court | Privy Council |
[1986] SGPC 5
Privy Council
Lord Bridge of Harwich
,
Lord Brandon of Oakbrook
,
Lord Oliver of Aylmerton
,
Lord Goff of Chieveley
and
Sir Ivor Richardson
Privy Council Appeal No 11 of 1984
Stewart Boyd QC and Graham Dunning (Holman Fenwick & Willan) for the first appellant
Ian Hunter QC and Jonathan Harvie (Jacques & Lewis) for the second appellant
AGordon Pollock QC, Niru K Pillai and Geraldine Andrews (Elborne Mitchell & Co) for the respondent.
Ocean Frost, The; Armagas Ltd v Mundogas SA [1985] 1 Lloyd's Rep 1 (folld)
Watt (Thomas) v Thomas [1947] AC 484 (refd)
Admiralty and Shipping–Carriage of goods by sea–Voyage charterparties–Negotiations for charter of vessel–Whether agreement concluded–Whether charterers' agent had authority to act–Claim for damages for breach of warranty of authority–Agency–Construction of agent's authority–Whether agent authorised to contract–Breach of warranty of authority–Sub-agent's right to indemnity against unauthorised agent–Contract–Contractual terms–Conditions–Whether charter agreement subject to condition precedent–Remedies–Damages for breach of warranty of authority
Azoexport of Romania sold fertiliser to Mr Hiswara of an Indonesian company called PT Bina Alam (“Bina Alam”), who purported to act and sign the sale contract on behalf of Phillips Petroleum International Inc (“Phillips”). Subsequently, Phillips agreed that the contract should be in its name as buyer. Under the sale contract, the fertiliser was to be shipped from Constanza, Romania, to Indonesia.
Mr Hiswara asked a firm of brokers called Hai Nguan & Co (“Hai Nguan”), the appellant in the second appeal, to charter vessels to carry the fertiliser to Indonesia. In addition, Mr Hiswara asked Mr de Guzman of Phillips to charter a vessel for the first shipment. Hai Nguan instructed another firm of brokers, CF Sharp & Co (Malaya) Pte Ltd (“Sharp”), the respondent in both appeals, while Phillips instructed as brokers Stolt-Nielsen Singapore Pte Ltd (“Stolt-Nielsen”).
Sharp then entered into negotiations, on behalf of and under the impression that Phillips was the charterer, for the chartering of tonnage for all four shipments with Polfracht (Australasia) Sydney (“Polfracht Sydney”) which acted on behalf of the shipowner, Grace Shipping Inc (“Grace”), the appellant in the first appeal.
Grace alleged that by an exchange of telex messages between Polfracht Sydney and Sharp, a concluded agreement was entered into on 5 February 1975 between Grace and Phillips for the carriage of all four shipments of fertiliser from Romania to Indonesia, which would have been binding on the parties but for the fact that, as subsequently transpired, Sharp had no authority to act on behalf of Phillips. A contract of affreightment between Grace and Phillips was drawn up and, having been signed by Polfracht Sydney on behalf of Grace, was despatched by air to Singapore for signature by Phillips. Mr de Guzman refused to sign the contract on behalf of Phillips.
Grace commenced proceedings in the High Court of Singapore against both Phillips and Sharp, claiming damages from Phillips as the first defendant for breach of the contract of affreightment and, in the alternative, damages from Sharp for breach of warranty of authority. Sharp, in their turn, joined Hai Nguan as third parties, claiming an indemnity from it on the ground that, in purporting to contract on behalf of Phillips, it had acted on the instructions of Hai Nguan.
The trial judge dismissed Grace's action against Phillips, held that Sharp was liable in damages to Grace for breach of warranty of authority and dismissed Sharp's third party proceedings against Hai Nguan. Sharp appealed to the Court of Appeal which allowed Sharp's appeal on both points. Grace and Hai Nguan appealed to the Privy Council which appeals were considered separately.
In Grace's appeal, the first issue was whether a concluded agreement had been reached in the telex messages passing between Sharp and Polfracht Sydney. The second issue was whether any agreement so reached was subject to a condition precedent, which was not fulfilled. It was contended that Sharp had made it a condition precedent to the formation of the contract that Grace should nominate the vessel for the first voyage under the contract and as Grace had nominated a vessel which they did not bona fide believe to be available for the performance of the first voyage, the condition precedent was never fulfilled.
In Hai Nguan's appeal, the issue was whether the Court of Appeal was entitled to interfere with the decision of the trial judge in deciding whether Sharp was authorised by Hai Nguan to contract on behalf of Phillips which was essentially a question of fact.
Held, allowing the first appellant's appeal and dismissing the second appellant's appeal:
(1) The question whether there was a concluded agreement in the telex messages depends entirely upon a detailed analysis of the telexes which passed between Sharp and Polfracht Sydney between 28 January and 5 February 1975. On the telexes which passed between Sharp and Polfracht Sydney, there was no mention whatsoever of the arbitration clause until the telex from Polfracht Sydney on 6 February 1975. In the absence of any mention whatsoever of the arbitration clause by 5 February 1975, it was impossible to infer that the parties did intend that a binding contract was dependent upon filling in the gap in the arbitration clause. That there was in fact no such intention was confirmed by the fact that a meeting took place for the signature of the contract at a time when, to the knowledge of both Sharp and Polfracht Sydney, no agreement had yet been reached on the place of arbitration. A complete agreement had been reached on all relevant points on 5 February 1975, as both Sharp and Polfracht Sydney thought at the time: at [11] and [18].
(2) The telexes did not give rise to any condition precedent upon the fulfilment of which the agreement depended. Before the agreement was reached, there was a request for a nomination to be made for the first voyage. The effect of the nomination was that, when the contract was made, Grace would become contractually bound to perform the first voyage in accordance with the nomination made by it which, as accepted, gave it a liberty to nominate a substitute. There was a complete agreement on 5 February 1975 and Sharp was liable in damages to Grace for breach of warranty of authority: at [29].
(3) The trial judge was faced with the task of assessing the evidence of witnesses about telephone conversations which had taken place over five years before. In cases where memories may be unreliable, it is of crucial importance for the judge to have regard to the contemporary documents and to the overall probabilities. Mr Hiswara intended Phillips to be named as a party to give an appearance of substance to the shipowner. In Hai Nguan's letter to Sharp dated 30 January 1975 the description given of the charterer was - Phillips on behalf of Bina Alam. The naming of Phillips as charterer, even on behalf of Bina Alam, showed, in the absence of any indication that it was to sign as agent only, an intention that Phillips were to be bound. Having considered the contemporary documents, the overall probabilities pointed overwhelmingly to the conclusion that Sharp was indeed authorised by Hai Nguan to contract on behalf of Phillips: at [53], [54], [61] and [62].
(4) Sharp had to pay Grace the sum of US$253,658 with US$127,591.36 by way of interest and Hai Nguan had to indemnify Sharp in respect of those sums: at [63].
(delivering the judgment of the Board):
1 There are before their Lordships two related appeals from the Court of Appeal of the Republic of Singapore, brought by leave of that court. The case is one of some complexity; and it may be helpful if their Lordships set out the background before explaining the nature of the appeals themselves.
2 The case is concerned with the making of a contract of affreightment for the carriage of cargoes of fertiliser from Romania to Indonesia. The fertiliser in question was the subject of a sale contract dated 30 November 1974. The sellers under the sale contract were Azoexport of Romania; for the buyers, the contract was made by a Mr Hiswara of an Indonesian company called PT Bina Alam (“Bina Alam”), though he purported to act, and to sign the contract, on behalf of a substantial international company called Phillips Petroleum International Inc (“Phillips”). It appears that, subsequently, Phillips (acting through a Mr de Guzman) agreed that the contract should be in their name as buyers, on the condition that Bina Alam should pay to Phillips a sum of US$80,000. A separate agreement to this effect was entered into between Bina Alam and Phillips.
3 Under the sale contract with Azoexport, a quantity of 40,000mt of fertiliser was to be purchased, to be shipped from Constanza in four shipments of about 10,000mt each. The sale was on FOB terms; and it was therefore necessary for the buyers to find the necessary tonnage. Mr Hiswara asked Mr Lim Kuy Bak (“Mr Lim”), a partner in a firm of brokers called Hai Nguan & Co (“Hai Nguan”), the appellants in the second appeal, to charter in vessels for this purpose. It appears that, in addition, Mr Hiswara asked Mr de Guzman of Phillips to charter in a vessel for the first shipment. These dual instructions were likely to, and did, lead to some confusion. Hai Nguan, in their turn, instructed another firm of brokers, CF Sharp & Co (Malaya) Pte Ltd (“Sharp”), the respondents in both appeals, while Phillips instructed as brokers Stolt-Nielsen Singapore Pte Ltd (“Stolt-Nielsen”). Hai Nguan, Sharp and Stolt-Nielsen all carry on business in Singapore.
4 Sharp then entered into negotiations for the chartering of tonnage for all four...
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