Sino Channel Asia Ltd v Dana Shipping & Trading PTE Singapore and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Gross |
| Judgment Date | 02 November 2017 |
| Neutral Citation | [2017] EWCA Civ 1703 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2016/2375 |
| Date | 02 November 2017 |
[2017] EWCA Civ 1703
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
The Honourable Sir Bernard Eder
[2016] EWHC 1118 (Comm) (CL-2016-000063)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Gross
Lord Justice Flaux
Case No: A3/2016/2375
Michael Coburn QC (instructed by Bryan Cave) for the Respondent
Duncan Matthews QC and Matthew McGhee (instructed by Holman Fenwick Willan LLP) for the Appellants
Hearing date: 28 September, 2017
Judgment Approved
INTRODUCTION
This is the judgment of the Court to which we have each contributed.
The Appellants appeal against the judgment of Sir Bernard Eder, sitting as a Deputy High Court Judge, dated 20 th May, 2016, [2016] EWHC 1118 (Comm) ("the judgment"). Holding in favour of the Respondent ("Sino"), the Judge set aside the arbitration award of Mr Christopher Moss, dated 3 rd February, 2015, corrected 15 th June, 2015, awarding the First Appellant ("Dana") US$1,680,404.15, plus interest and costs ("the Award") and declared "that the arbitral tribunal was not properly constituted, and that the Award was made without jurisdiction".
The disputed question was whether service of Dana's notice of arbitration ("the notice") on Beijing XCty Trading Limited ("BX") was effective, giving rise to three principal issues:
i) Did BX have implied actual authority to receive the notice on behalf of Sino? ("Issue I: Implied actual authority")
ii) Did BX have ostensible authority to receive the notice on behalf of Sino? ("Issue II: Ostensible authority")
iii) If the answer to Issues I and II is "no", did Sino ratify BX's receipt of the notice? ("Issue III: Ratification").
The Judge gave the answer "no" to all of Issues I – III. On the appeal, the Appellants submit the Judge was wrong and that the correct answer to each of Issues I – III is "yes", though they need only succeed on any one of those Issues for the appeal to be allowed. Sino contends that the Judge was right on all the Issues.
As the present case demonstrates, there is no shortage of variety in commercial transactions.
It is common ground that Sino incurred liability as charterer, under a Contract of Affreightment, dated 9 th April, 2013 ("the COA"), made with Dana, as owner. However, apart from Mr Jung Byung Dug ("Mr Jung"), the Director and apparently 100% shareholder of Sino, signing the COA in its name, Sino played no part in the negotiation and performance of the COA. Thus, Sino signed the COA on behalf of and "lent its name" to Mr Zhou Wen Li ("Mr Zhou"), the Director and owner of BX, a Chinese company, with a Beijing address. In short, Sino was "fronting" for BX.
Strikingly, with one exception, all communications (after the signing of the COA), whether directly or via the brokerage channel – Lynx Freight & Trading SA ("Lynx") for Dana and Triton Shipping ("Triton") for Sino — were between Dana and a Mr Daniel Cai of BX ("Mr Cai"). The sole exception was a letter dated 1 st November, 2013 ("the invitation letter"), after disputes had arisen under the COA, when Mr Zhou invited Mr Hodgins of Dana for talks in Hong Kong and Shenzhen with Mr Cai, in an attempt to resolve those disputes. Dana knew nothing of the fronting or that Mr Cai was a representative of BX, rather than an employee or representative of Sino. To the contrary, Triton (Sino's broker) had stated to Lynx that Mr Cai was Sino's representative or employee; indeed, Mr Cai was the only representative of Sino identified to Lynx and it was Mr Cai who dealt with all post-fixture matters, including the problems affecting the performance of the COA.
In the event and as already foreshadowed, disputes arose under the COA and, on the 4 th and 5 th February, 2014, pursuant to cl. 55 of the COA, Dana sent the notice — directly and via the brokerage channel — that it had commenced arbitration and appointed Mr Christopher Moss as its arbitrator. The notice called upon Sino to appoint its arbitrator within 14 days and to notify Dana accordingly. The notice was sent to Mr Cai, the only individual with whom they had been in communication.
Sino did not respond and did not participate in the arbitration. It appears that BX took no effective steps to defend the claim and, as recounted by the Judge, Mr Moss took on the role of sole arbitrator and made the Award. The Award was sent by hard copy, under cover of a letter dated 15 th June, 2015, to Sino's address in Hong Kong and was received by Sino. Subject to questions of the authority of BX to receive the notice, this was the first Sino had heard of the arbitration.
Against that background, on the 28 th January, 2016, Sino applied for a declaration pursuant to s.72 (1) (b) and/or (c) of the Arbitration Act 1996 ("the Act") which provides as follows:
"(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 the court for a declaration ….or other appropriate relief."
As already recorded, Sino was successful before the Judge.
We were most grateful to Mr Matthews QC, for Dana (who did not appear below) and to Mr Coburn QC, for Sino, for their excellent submissions.
THE FACTS
For present purposes, the facts can be briefly outlined, in good measure gratefully adopting the summary contained in the judgment. The facts themselves, as distinct from the inferences and conclusions to be drawn from them, were essentially undisputed. Further, as the position adopted by the Appellants before the Judge was that there was, in general, no need for oral evidence or disclosure, the Judge proceeded on the basis that the Sino documentary evidence of fact was to be accepted as true. The same premise has applied on this appeal.
As set out in the judgment (at [10] and following), Mr Jung is Korean. In 2007, he set up Sino as his own trading company, registered in Hong Kong. In about 2009, Mr Zhou — whom Mr Jung had met in the course of his (Mr Jung's) previous employment – approached Mr Jung with a view to Sino providing BX with the same sort of letter of credit financial services as had been provided by Mr Jung's previous employers. Mr Jung agreed to do so. These "services" entailed BX arranging back-to-back sale and purchase contracts ("the sale and purchase contracts") – back-to-back save for a difference between the prices — to be concluded in the name of Sino, with Sino handling the financial (letter of credit) side of the transaction and BX handling the operational side. As between Sino and BX, Sino would be entitled to receive US$1 per metric tonne. Subject to this "commission", BX would be entitled to the difference between the buying and selling price. Mr Cai appears to have joined BX in around 2011/2012. As the Judge summarised Mr Jung's (documentary) evidence (at [16]):
"Mr Jung met him on a few occasions and exchanged a limited number of Skype messages with him. Mr Jung formed no particular impression of Mr Cai, except that he was Mr Zhou's subordinate and assisted him. Mr Jung dealt mainly with Mr Zhou, who spoke Korean."
Pausing here, the sale and purchase contracts contained detailed notice provisions. A typical example, we were told, was that found in cl.15 of the Purchase Agreement dated 20 th June, 2013:
"Buyer: Sino Channel Asia Ltd
Flat B, 5F, Wing Hing Comm. Bldg,
139 Wing Lok Street, Sheung Wan
Hong Kong
…..
15. Every notice or demand or other communication under or in connection with this Sales Contract shall be in writing and delivered at or sent by hand or registered airmail or by international courier or by email or facsimilie to the address mentioned in this agreement, referring the contract no and date herein."
The Judge came next to the COA (at [18] and following). In early 2013, Mr Zhou asked Mr Jung to enter into a COA in the name of Sino. This was unusual, as all previous sale and purchase contracts had been on C&F terms but Mr Jung was prevailed upon by Mr Zhou and did what he was asked. The COA appears to have been negotiated by the brokers — Lynx and Triton – and Sino was not itself involved in the negotiations. However, as the Judge continued (at [19]):
"…Mr Jung signed it and it bears Sino Channel's corporate stamp. Sino Channel fully accepts (and has never denied) that it became bound by the COA as the result of signing it."
Augmenting the Judge's summary, Mr Jung's frame of mind appears clearly from his evidence. In his 5 th affidavit, sworn on 26 th January, 2016 in the Hong Kong enforcement proceedings (referred to by the Judge, at [38], now awaiting the outcome of the litigation in this jurisdiction), Mr Jung said this (at para. 18):
"….Mr Cai was not authorised by the Respondent [i.e., Sino] to negotiate on the terms of the Charterparty [i.e., the COA]. I believe he might have been authorised by Mr Zhou…. The Respondent was not involved in the negotiation and performance of the Charterparty. The Respondent only 'lent' its name to Beijing XCty and signed the Charterparty. That is all…."
As was common ground, it was clearly anticipated that BX, rather than Sino, would handle the day-to-day operation of the COA.
The COA provided for the carriage of about 275,000 mt of iron ore from Venezuela to China, to be carried in five shipments over the period June to October 2013. Questions of governing law and arbitration were dealt with in cl. 55 of the COA:
"55. Law and Arbitration
This Charter Party shall be governed by English Law and any dispute arising out of this Charter Party or any Bill of Lading issued...
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