Sino Channel Asia Ltd v Dana Shipping and Trading PTE Singapore & Anor [2016] EWHC 1118 (Comm)

Case No CL-2016-000063[2016] EWHC 1118 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NLDate 20 May 2016
Before
THE HON SIR BERNARD EDER
Between
SINO CHANNEL ASIA LTDClaimantDANA SHIPPING AND TRADING PTE SINGAPOREDefendantsDANA SHIPPING AND TRADING SADefendant
Michael Coburn QC (instructed by Bryan Cave) for ClaimantChirag Karia QC (instructed by Holman, Fenwick Willan LLP) for DefendantsHearing Hearing date: 20 April 2016
JudgmentThe Hon Sir Bernard Eder:
[1]This hearing concerns the status of arbitration proceedings purportedly commenced by the First Defendant, Dana Shipping and Trading Pte Singapore (“Dana”), against the Claimant, Sino Channel Asia Limited (“Sino Channel”) in connection with disputes arising under a contract of affreightment (“COA”) dated 9 April 2013 between Dana as owner and Sino Channel as charterer. As appears more fully below, Dana appointed Christopher J Moss as their arbitrator and emailed their notice of arbitration to a man called Mr Daniel Cai calling upon Sino Channel to appoint their arbitrator. It is common ground that Mr Cai was not an employee of Sino Channel but an employee of a different company, Beijing XCty Trading Limited (“Beijing XCty”). It is Sino Channel’s case that Mr Cai had no authority to accept service on Sino Channel’s behalf; that therefore such purported service was ineffective; and that, as a result, Sino Channel did not respond because they were unaware of the arbitration and did not participate in it. In the event, Mr Moss took on the role of sole arbitrator and subsequently made an award in Dana’s favour on 3 February 2015, with a correction made on 15 June 2015 (the “Award”). The Award was sent to Sino Channel (by hard copy to its address in Hong Kong) and received by them. This was the first Sino Channel had heard of the arbitration.[2]It is against that background that Sino Channel now applies for a declaration and order pursuant to s72(1)(b) or (c) of the Arbitration Act 1996 (the “Act”) which provides in material part as follows:
“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.” … by proceedings in court for a declaration or injunction or other appropriate relief.”
[3]The declaration and order as sought in the Claim Form issued on behalf of Sino Channel was in relevant part as follows:
“… a declaration that the [Award]...was made without jurisdiction and is of no effect and an order setting aside the Award accordingly ...”
[4]At the outset, I should mention a threshold point as to whether it is, in any event, open for the Court to grant such declaration and order under s72(1) in the context of the Act as a whole and having regard, in particular, to the terms of s72(2) which provides as follows:
“(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 [2006] 1 Lloyd’s Rep 537 at [56]-[59] and Walker J in The Prestige [2014] 1 Lloyd’s Rep 137 at [59]-[78] and [82]-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. and section 70(2) (duty to exhaust arbitral procedures) does not apply in his case.”[5]However, as to the first point, for the reasons given by Walker J. in The Prestige, I agree that there is no necessity to confine s72(1) to the position before the issue of an award. As to the second point, it is noteworthy that although s70 imposes strict time limits for any application or appeal under ss 67, 68 or 69, there is no equivalent time limit stipulated for any application under s72(1). This is presumably because, as recognised by Walker J. at [82], those who do not participate in the arbitral proceedings are entitled to wait until an application to enforce. For these reasons, it would seem to follow that any application under s72(1) is not subject to any time limits. I proceed on this basis.[6]In the alternative to its application under s72(1), Sino Channel applies under s67 of the Act for an order setting aside the Award on the ground that the Tribunal lacked jurisdiction; and/or under s68(2)(a) and (b) of the Act for “… an order setting aside the Award as there was serious irregularity affecting the proceedings on the grounds that [Dana] failed to serve any effective notices relating to the alleged arbitration on [Sino Channel] and/or because communications from Mr Cai to the arbitrator were fraudulent which caused a substantial injustice to [Sino Channel] as it had no opportunity to present its case”. In that context, Mr Coburn QC accepts that such applications are out of time and in so far as may be necessary seeks an extension of time under s79 and/or s80(5) of the Act.[7]In summary, it is Dana’s case that(i) Mr Cai had actual implied authority and/or ostensible authority to receive notice of arbitration on behalf of Sino Channel; and/or(ii) that such authority was subsequently ratified by Sino Channel. On that basis, Mr Karia QC submits that (quite apart from the controversial issues referred to above and, in particular, any question of time limits) the application under s72(1) of the Act must, in any event, fail on its merits, as must the alternative applications under s67 and/or s68 of the Act.

The Facts

[8]So far as the factual evidence is concerned, the parties have served a number of witness statements. In particular, Sino Channel relies upon certain statements of Jung Byung Dug (“Mr Jung”), the Director of Sino Channel; and a statement of Serena Cooke, a solicitor employed by Bryan Cave who has the conduct of the matter on behalf of Sino Channel. Dana relies upon a statement of Konstantinos Christides, Dana’s Head of Operations; a statement of Christos Stamatou, a broker at Lynx Freight & Trading SA (“Lynx”), Dana’s chartering brokers; and Dimitrios Exarchou, a partner in Holman, Fenwick & Willan (“HFW”) who has the conduct of the matter on behalf of Dana. In addition, the evidence included certain affidavits previously sworn for the purposes of related proceedings in the High Court of the Hong Kong Special Administration Region as referred to below.[9]The main facts, from the perspective of Sino Channel, are set out in the statement of Mr Jung. The position taken by Dana is that, subject to one irrelevant exception, there was no need for oral evidence or disclosure. On that basis, it was common ground that I should proceed on the basis that what is set out in the statements and earlier affidavits served by Sino Channel is true. Accordingly, the following summary of facts is taken largely from the parties’ skeleton arguments.[10]Mr Jung is Korean. After attending a Korean university he worked for a Korean corporation and became the Chief Financial Officer of its Hong Kong subsidiary. In 2007 he left to set up his own trading company, Sino Channel, but he remained in Hong Kong. Sino Channel is a Hong Kong registered company. Apart from Mr Jung, it has three employees, all Hong Kong residents.[11]In about 2009, Mr Jung was approached by Mr Zhou Wen Li (“Mr Zhou”), the director and owner of Beijing XCty. Mr Jung had encountered him during the course of his (Mr Jung’s) previous employment.[12]Beijing XCty is a Chinese company, registered in the PRC and with a Beijing address. Mr Zhou is its legal representative.[13]Mr Zhou asked if Sino Channel would provide Beijing XCty 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.[14]In essence, the “services” in question involved Beijing XCtyY arranging back-to-back sale and purchase contracts which would be concluded in the name of Sino Channel. Sino Channel would handle the financial (letter of credit) side of the transaction and Beijing XCty would handle the operational side.[15]As between Sino Channel and Beijing XCty, Sino Channel would be entitled to receive US$ 1 per metric tonne. Subject to that, Beijing XCty would be entitled to the difference between the buying price and the (higher) selling price.[16]Mr Cai appears to have joined Beijing XCty in around 2011/2012. 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.[17]Mr Cai communicated mainly with one of Sino Channel’s other employees, Lau King Kwong, known as “Joe”. There was evidence before the Court of various exchanges of Skype messages over the period 2012-2015. They involve mundane liaison in the light of the shared responsibility for the transactions in question.[18]In early 2013 Mr Zhou asked Mr Jung to enter into a COA in the name of Sino Channel. This was unusual (since all previous sale contracts had been on a C&F basis) but Mr Jung was prevailed upon by Mr Zhou and did what he was asked.[19]Sino Channel was not itself involved in the negotiation of the COA. Rather, it appears to have been negotiated through brokers i.e. Lynx for Dana and Triton for Sino Channel. However, 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.[20]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.[21]Clause 55 of the COA provided for London arbitration in conventional terms, which contemplated that the arbitration would, in effect, be triggered on the receipt “by one party of the notification in writing of the appointment of the other party’s arbitrator ...”; that the other party would then have 14 days to appoint its arbitrator “… failing which the decision of the single arbitrator appointed shall apply …”[22]Given the nature of their relationship, it was expected by Sino Channel and Beijing XCty that the latter rather than the former would handle the day-to-day operation of the COA.[23]As it turned out, however, Beijing XCty failed to do so, and it appears that no shipments under the COA were ever made. This gave rise to a dispute in which Dana initially involved its P&I Club and later its solicitors, HFW.[24]At an early stage Mr Cai had been identified by the brokers involved as “charterers’ guy” and Dana evidently obtained two email addresses personal to Mr Cai, viz danielcaix@hotmail.com and danielcaix@vip.sina.com. (To avoid any confusion, it should be noted that the “sina” in the latter is nothing to do with Sino Channel but is simply a Chinese internet service provider.)[25]There appear to have been various exchanges between Dana’s side and Mr Cai, as well as a meeting in late 2013 in Shenzhen, China, between him and a Mr Hodgins of Dana. The dispute, however, was not resolved. None of this was known to Sino Channel at the time; Mr Jung had been told by Mr Zhou in May or June of 2013 that there had been some problems with the COA but these were nothing to worry about.[26]It is common ground that Mr Cai presented himself to Dana as “Daniel of Sino Channel Asia”; and the evidence also shows that Dana and Lynx and been informed by Sino Channel’s brokers (Triton) that Mr Cai was “Charterers’ guy”. However, Mr Coburn QC submitted that it was relevant to bear in mind the following: 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.[27]Following the failure of negotiations, Dana purported to commence arbitration proceedings by an email dated 4 February 2014 sent to danielcaix@vip.sina.com.[28]The same message was also sent by Dana to their brokers (Lynx) and forwarded by them to Sino Channel’s’ brokers, Triton. There is no record of it being forwarded by Triton to Sino Channel; but the evidence is that in effect it would probably have been forwarded by Triton to Mr Cai. For the avoidance of doubt, I should explain that Mr Karia QC does not rely on this email through the broking chain as constituting the relevant notice of the commencement of the arbitration to Sino Channel. However, he does rely on the foregoing as evidence of Mr Cai’s actual implied or ostensible authority to receive the notice on behalf of Sino Channel.[29]In this context, Mr Coburn QC emphasised that it would have been entirely straightforward for Dana validly to commence an arbitration against Sino Channel at this stage. This was because Dana had already commissioned and obtained reports from a company called “Infospectrum” which contained sufficient information to effect valid service on Sino Channel. In particular, although the reports contained certain inaccuracies, there is no doubt that they showed that Mr Jung was(a) the 100% shareholder of Sino Channel;(b) one of its two directors (the other being Son Kwan Tae, another Korean); and(c) the general manager of Sino Channel. In addition, they showed (i) Sino Channel’s registered and trading address in Hong Kong, at which service could straightforwardly have been effected under s76(4)(b) of the Act; and (ii) an email address stated to be Sino Channel’s email address, namely hkscal@gmail.com (which Mr Coburn accepted could have been used to effect valid service).[30]All subsequent notices and messages in the purported arbitration were likewise sent to danielcaix@vip.sina.com.[31]Mr Cai appears to have sent just three messages in response before ceasing communication altogether. 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.[32]The last of these messages calls for further comment. The fax purports to be on Sino Channel’s paper and to bear its signature and stamp. However, as Mr Jung explains, it is in fact a fairly crude cut-and-paste job. Mr Cai evidently felt the need to pretend that his message was an official message from Sino Channel, endorsed by Mr Jung and duly stamped, when in fact it was no such thing.[33]In due course HFW sent further notices/messages (always to danielcaix@vip.sina.com) which resulted in the purported appointment of Mr Moss as sole arbitrator.[34]Faced with silence from Sino Channel’s side of the arbitration, Mr Moss made debarring orders and in the end the Award in Dana’s favour for damages in the sum of US$ 1,680,404.15 plus interest and costs.[35]It is common ground that the Award as corrected was sent by post on behalf of Dana to Sino Channel at its registered office in Hong Kong where it was received on 30 June 2015 and then forwarded immediately to Mr Jung by email. It is Mr Jung’s evidence that he did not fully understand the Award or its ramifications as he assumed that for any legal proceedings to have been started they would have had to have been notified to Sino Channel; that he passed the Award immediately to Mr Zhou by email; that he received no response from Mr Zhou but asked him about it “some time later”in Beijing, PRC when he asked him “what the Award was about”; that Mr Zhou told him to “ignore it”, that he (Mr Zhou) was dealing with it and that it was not necessary for him (Mr Jung) to do anything about it. Mr Jung gives a fuller explanation in paragraph 19 of his statement as follows:
“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.”
[36]It appears that Mr Jung and Sino Channel did nothing further until after the commencement of enforcement proceedings in Hong Kong when Mr Jung sent an email to Mr Moss on 29 October 2015 informing him that Sino Channel had not received any notice of the arbitration and did not have information relating thereto. This prompted a brief response from Mr Moss which is not relevant. Subsequently, Mr Zhou provided a written “Confirmation” dated 3 November 2015 that he and Beijing XCty would “solve the case” and “not make any harm” to Sino Channel. That undertaking has not been honoured.[37]The present application in this Court was eventually issued on 28 January 2016.[38]For the sake of completeness, I should mention that, as I understand, the enforcement proceedings in Hong Kong have, in effect, stalled pending the decision of this Court. In summary, an Order to enforce the Award was originally granted by the High Court of the Hong Kong Special Administrative Region on 16 November 2015. Thereafter, Sino Channel applied to set aside that Order. That application was originally due to be heard on 16 March 2016. However, in the event that application was adjourned on certain terms for reasons given in a Judgment of the High Court (Mimmie Chan J) delivered on 14 March 2016. In the course of that Judgment, the Judge expressed certain tentative views which were initially relied upon by Mr Karia QC. However, as he readily accepted, it is ultimately for this Court to determine the issues arising on the present applications.[39]Against that background, I turn to consider the three main substantive issues viz: 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 ? iii) Ratification.

Implied Actual Authority

[40]There was little, if any, dispute on the applicable principles. Thus, Mr Karia QC submitted (and I accept) that actual authority arises from the relationship between the principal and the agent – here, between Sino Channel and Beijing XCty. Whereas actual express authority is given by express words, implied actual authority “is inferred from the conduct of the parties and the circumstances of the case”: see Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549, 583 (CA), per Lord Denning MR. To determine the extent of Beijing XCty’s implied actual authority, the Court must examine “what the actual circumstances of the relationship between [the agent – Beijing XCty] and the [principal – Sino Channel] may show” and consider what authority Beijing XCty “took and was allowed to take” from Sino Channel. Implied actual authority will arise from the principal acquiescing in the agent’s exercise of authority: see, Hely-Hutchinson at 587, per Lord Wilberforce.[41]Bearing in mind these principles and in support of Dana’s case that Mr Cai had implied actual authority to receive the notice of arbitration on Sino Channel’s behalf, Mr Karia QC submitted as follows: 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”.[42]In very broad terms, Mr Coburn QC accepted that Beijing XCty and, in particular, Mr Cai had generally been responsible for the negotiation of the COA and subsequent matters relating thereto. However, he submitted, in effect, that service of notice of commencement of arbitration proceedings was of an entirely different character; and that in the absence of explicit authority to accept service, it would be both extraordinary and unprecedented if service could validly be effected on company X by sending an email to a junior employee of company Y, even if that employee was in practice handling the contract in question, and even if there was a relatively close relationship between companies X and Y.[43]In support of that submission, Mr Coburn QC referred me to s76 of the Act which provides as follows: “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.” (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,[44]In this context, Mr Coburn QC also referred me to the Judgment of Gross J in Lantic Sugar Ltd v Baffin Investments Ltd (“The Lake Michigan”) [2009] EWHC 3325 (Comm), [2010] 2 Lloyd’s Reports 141 from which he derived the following propositions: 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.)[45]Thus, Mr Coburn QC submitted that the position is a fortiori in the case of a person (whether employee, agent, sub-contractor or other third party) who is (as in the present case) in practice responsible for the performance of a party’s substantive contractual obligations and/or is the sole or main contact point for contractual purposes; that one could not serve a notice of arbitration (or other originating process) on the Master of a ship; a repairman sent by his company; a relationship manager at a bank; a telephonist or driver of a minicab firm; a foreman; a subcontractor to whom an entire building project had been subcontracted etc.; and that it would be nothing to the point that each of these might have been the sole or main contact point, in practice handling the performance of the contractual obligations in question. This was, submitted Mr Coburn QC, particularly important in a shipping context where it is routine for contractual obligations to be performed in practice by third parties e.g. a head owner performing a disponent owner’s obligations, or a receiver performing a charterer’s obligation to discharge.[46]Although the broad test in Hely-Hutchinson is easy to state, it is often far from straightforward to reach a conclusion in practice as to the circumstances in which an employee or agent may have an implied actual authority to perform some particular act on behalf of another. However, it seems to me that the examples referred to by Gross J in The Lake Michigan of P&I Clubs and solicitors not generally having authority to accept service of proceedings are instructive. Of course, I readily accept (as Mr Coburn QC acknowledged) that s76 of the Act may operate more flexibly than the CPR court regime for service. However, even in the context of a notice to commence arbitration, such notice is an important step which has significant legal consequences beyond the performance of ordinary contractual obligations – as this case demonstrates. In particular, by virtue of the terms of Clause 55 of the COA, once that notice is served and the other party does not appoint its arbitrator within the stipulated 14 day period, the first appointed arbitrator becomes sole arbitrator vested with important statutory powers by virtue of the terms of the Act. Such powers would, of course, include the general powers exercisable by the tribunal under s38 of the Act. Similarly, once the tribunal is constituted, the parties are subject to the general statutory duties under s40 of the Act. Further, the effect of s58(1) of the Act is to render any award made by the tribunal final and binding both on the parties and on any persons claiming through or under them subject to any legitimate challenge as contemplated by s58(2) of the Act. These are all important legal consequences of the effect of serving a notice of arbitration.[47]For these reasons, it seems to me that Mr Coburn QC is right in his main submission that even where an employee or agent has a wide general authority to act on behalf of his employer/principal, such authority does not (without more) generally include an authority to accept service of a notice of arbitration.[48]So far as the present case is concerned, I was initially much impressed by Mr Karia QC’s argument that the fact that Triton (who were, of course, Sino Channel’s brokers) appear to have passed the notice of arbitration to Beijing XCty supports the conclusion that Beijing XCty are properly to be regarded as having the necessary implied actual authority to receive such notice on behalf of Sino Channel. However, there was no direct evidence from Triton; and, on reflection, it seems to me that such action may simply have been taken by Triton without any thought simply because all messages connected with the COA were routed in this way. A mistake of that kind is perhaps unsurprising – as was the mistake in The Lake Michigan as referred to by Gross J at [45]. However bearing in mind my earlier comments and whatever the reason here for Triton’s action, I remain unpersuaded that such action (even taken with all the other evidence) is sufficient to lead to the conclusion that Beijing XCty had implied actual authority to receive the notice on behalf of Sino Channel. Equally, I do not consider that Mr Jung’s response on receipt of a hard copy of the Award would justify such conclusion.[49]Thus, in the present case, while I accept that Beijing XCty and Mr Cai had a general authority to act on behalf of Sino Channel in connection with the COA, I am not persuaded that Beijing XCty or Mr Cai had any implied actual authority to accept notice of arbitration on behalf of Sino Channel.

Ostensible authority

[50]Again, there was little, if any, dispute as to the applicable principles. As submitted by Mr Karia QC, unlike actual authority, ostensible authority is a form of estoppel arising from a representation by the principal to a third party that the agent has authority to act in the matter on the principal’s behalf. “Ostensible or apparent authority is the authority of an agent as it appears to others. It often coincides with actual authority.” See Hely-Hutchinson [1968] 1 QB at 583, per Lord Denning MR. As Diplock LJ explained in Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480, 503 – 504:
“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.”
[51]In principle, the foundation of such ostensible authority is the representation(s) made by the principal; and it is generally trite law that an employee/agent cannot purport to create his own ostensible authority. However, Mr Karia QC submitted that in certain circumstances, the ostensible authority may arise in circumstances where the principal places the agent in a position where he (the agent) can hold himself out as the agent of the principal and, by virtue of the principal acquiescing in his activities, it can be said that that the principal has in effect caused the representation to be made. In support of that submission, Mr Karia QC relied on the explanation given by Lord Pearson in Hely-Hutchinson v Brayhead Ltd [1968] 1 QB at 593A-D in the following terms:
“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.)
[52]I did not understand Mr Coburn QC to disagree with any the foregoing. However, there was a substantial dispute as to the proper inferences and conclusions to be drawn from the facts.[53]For his part, Mr Karia QC relied on the facts already summarised above and the following further facts in support of his submission that Beijing XCty had ostensible authority to receive the notice of arbitration; and, in particular, that Sino Channel placed Beijing XCty (and thereby Mr Cai) in a position in which it could “hold [itself] out as [Sino Channel’s] agent” and acquiesced in its activities “so that it can be said [Sino Channel has] in effect caused the representation to be made.”[54]In summary and at the risk of some repetition, the further main facts gleaned from the various statements and affidavits submitted and relied upon by Mr Karia QC were as follows: 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.[55]Mr Coburn QC did not, indeed could not, dispute the facts as stated above. However, it seems to me that the main difficulty facing Mr Karia QC is similar to that which I have already considered in the context of the alleged implied actual authority. In summary, even taking all these stated facts at face value, I see nothing which constitutes an express representation by Sino Channel that Beijing XCty or Mr Cai had any authority to accept notice of an arbitration; nor that Sino Channel put Beijing XCty or Mr Cai in a position where the latter could hold themselves out to such effect and Sino Channel acquiesced in such activity. Any such representation could only arise by implication and, for reasons similar to those already considered in the context of the arguments relating to the alleged implied actual authority, I do not consider that such representation can be implied in the circumstances of the present case.

Ratification

[56]The law on ratification was summarised by Gloster J in SEB Trygg Holding Aktiebolag v Manches [2005] 2 Lloyd’s Rep. 129, 155 – 156 at [97] (affirmed [2006] 1 Lloyd’s Rep. 318 (CA)). The passages potentially relevant to the present case are the following:
“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.”
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.”[57]As to the facts, Mr Karia QC submitted that the relevant ingredients were satisfied either(i) by reference to what Mr Jung did, on his own account, immediately following receipt of the hard copy of the Award as referred to in paragraph 35 above; and/or(ii) by virtue of the subsequent inaction and acquiescence on the part of Sino Channel over a 4 month period i.e. from 30 June 2015 when Mr Jung received the Award by post until his email dated 26 October 2015 to the arbitrator after commencement of the enforcement proceedings.[58]In particular, as to (i) (which I shall refer to as “positive ratification”), Mr Karia QC submitted that Sino Channel unequivocally recognised the Award as being a binding Award validly arrived at by agreeing with Beijing XCty that Beijing XCty would pay it; that that agreement to pay the Award is inconsistent with Sino Channel maintaining that the Award is not valid or binding; and that it is difficult to conceive of a clearer act of ratification.[59]As to (ii) (which I shall refer to as “silent ratification”), Mr Karia QC submitted as follows: 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 7August, 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”
.

Silent Ratification

[60]It is convenient to consider the two limbs of Mr Karia QC’s case on ratification in reverse order; and I will therefore deal first with Mr Karia QC’s case on silent ratification. In general, I readily accept that such ratification may occur in certain circumstances. However, where an arbitral tribunal is not properly constituted, I do not consider that a party who has not participated in the arbitration proceedings can, in effect, be taken to ratify an award by mere silence and inaction. It is fair to say that there is not, so far as I am aware, any direct authority to that effect – and I did not hear much argument on this point. However, it is consistent with the views expressed by the editors of Arbitration Law at para 19.3 and also the observations of Lord Mance in Dallah Real Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan [2011] 1 AC 763 at [23] where he stated:
“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.”
[61]For this very brief reason, I reject Mr Karia QC’s case on silent ratification.

Positive Ratification

[62]Although there was no dispute before me as to the general principles summarised by Gloster J in SEB Trygg, it seems to me at least questionable as to whether such principles have any application in the context of this part of Mr Karia QC’s case based on positive ratification. Again, where the arbitral tribunal is not properly constituted, there appears to be no authority as to whether or not a party who has not taken part in the arbitral proceedings can, in effect, ratify an award made by such tribunal after the event even by some unilateral uncommunicated act on its part. (I put on one side any question of estoppel by representation.) The passage from the speech of Lord Mance in Dallah that I have already quoted and the absence of any relevant authority in the arbitration context suggest, at the very least, a cautious approach. Be all this as it may and contrary to my original understanding, Mr Karia QC emphasised that his case was not that Mr Jung had ratified the Award but rather that he (Mr Jung) had ratified the authority of Beijing XCty/Mr Cai to receive the notice of arbitration thereby, in effect, giving Beijing XCty/Mr Cai an “antecedent authority”.[63]Even so and on the assumption that the principles stated above do apply in the present context, there is no doubt that ratification requires an “unequivocal act”; and, in my judgment, the facts summarised above fall far short of such requirement. What is plain is that Mr Zhou told Mr Jung that Mr Cai had been acting without authority. I see nothing in Mr Jung’s conduct which can properly be regarded as “clear evidence” that he “adopted” or “recognised” what Mr Cai had done so as to clothe Mr Cai with antecedent authority. On the contrary, what Mr Zhou was saying – and what Mr Jung was, in effect, accepting – was that because Mr Cai had acted without authority, he (Mr Zhou) would deal with the matter and settle the Award. At no stage did Mr Jung adopt or recognise what Mr Cai had done. Similarly, I do not accept that the “agreement” that Beijing XCty would pay the Award is necessarily inconsistent with Sino Channel maintaining that the Award is not valid or binding so far as Sino Chanel Channel is concerned – still less that such “agreement” is to be regarded as an “unequivocal act” to such effect so as to give rise to any relevant ratification by Sino Channel.[64]For these brief reasons, I would reject Dana’s case on ratification.

Applications under sections 67 and/or 68 of the Act

[65]Given my conclusions as stated above, these applications under ss67 and/or 68 of the Act are largely academic and irrelevant. To the extent that they might be relevant, it is common ground that such applications are well out of time and that Sino Channel would need an appropriate extension. Although Sino Channel formally maintained its application for such extension, such application was addressed only briefly in Mr Coburn QC’s skeleton argument; and, without conceding the point, he did not advance any oral submissions in support of such application. That was no doubt very sensible because in my judgment, such application was quite hopeless for the simple reason that applying well-established principles, there is no proper basis for extending time. I need say no more.

Conclusion

[66]For all these reasons, it is my conclusion that Sino Channel is entitled to an appropriate declaration and relief pursuant to s72(1) of the Act. At the very least, it is plain that this should include a declaration that the arbitral tribunal in this case was not properly constituted and that the Award was made without jurisdiction. In the course of the hearing there was some dispute between the parties as to whether, if the Court reached the conclusion just stated, the Court could or should also make a further order setting aside the Award. In my view, such an order follows as a matter of logic from the conclusion already stated and constitutes “other appropriate relief” within the express words of s72(1). On that basis, it is my conclusion that Sino Channel is also entitled to an order setting aside the Award. As for the applications under ss67 and 68, the application for an extension of time is rejected; and it follows that the substantive applications under ss67 and 68 must also be rejected.[67]Counsel are requested to seek to agree a draft order for my approval. Failing agreement, I will, of course, deal with any outstanding issues.

Cited in 2 later judgments