“10 CHO’s primary case in these arbitrations was that the terms of the settlement agreement (“the Settlement Agreement”) ‘captured’ or precluded the claims brought in these arbitrations. However, a secondary case was that the commission and consultancy agreements were unenforceable. In essence, CHO alleged that the rate of hire paid by PDV Marina under the charter parties was “inflated” by “secret commissions” which were “siphoned off” by Internaves, Maritima and Lamat in breach of the obligations which these three parties owed to the parties to the charter parties. “11 A key issue in the arbitration was whether Maritima and Internaves were to be treated as CHO’s agents (either because they were CHO’s brokers or because they were joint intermediary brokers). If they were, then CHO argued that the commission and consultancy agreements were unenforceable because they had been procured in breach of the duty which Internaves and Maritima owed to CHO… If Internaves and Maritima were intermediary brokers, then it was argued on behalf of CHO that their failure to disclose to CHO and PDVSA the fact that they had an interest in keeping the “spread” between the rate of hire paid by PDVSA and the rate of hire received by CHO as wide as possible (to enable them to claim the maximum amount of commission) was a breach of the duty owed to both parties to the charter parties. As a matter of public policy, the commission and consultancy agreements would therefore, so it was argued, be unenforceable.”
“…(1) The arbitrator ascertains the facts. This process includes the making of findings on any facts which are in dispute. (2) The arbitrator ascertains the law. This process comprises not only the identification of all material rules of statute and common law, but also the identification and interpretation of the relevant parts of the contract, and the identification of those facts which must be taken into account when the decision is reached. (3) In the light of the facts and the law so ascertained, the arbitrator reaches his decision. In some cases, stage (3) will be purely mechanical. Once the law is correctly ascertained, the decision follows inevitably from the application of it to the facts found. In other instances, however, stage (3) involves an element of judgment on the part of the arbitrator. There is no uniquely “right” answer to be derived from marrying the facts and the law, merely a choice of answers, none of which can be described as wrong. Stage (2) of the process is the proper subject matter of an appeal under the Act of 1979. In some cases an error of law can be demonstrated by studying the way in which the arbitrator has stated the law in his reasons. It is, however, also possible to infer an error of law in those cases where a correct application of the law to the facts found would lead inevitably to one answer, whereas the arbitrator has arrived at another; and this can be so even if the arbitrator has stated the law in his reasons in a manner which appears to be correct, for the court is then driven to assume that he did not properly understand the principles which he had stated.”
“115. The foundation of this case was that the Claimants were either brokers or agents for PDV Marina/PDVSA or joint brokers for both parties. On the basis of the facts set out above(this being essentially a factual question which turned on therole they had played in the negotiations) we could not acceptthat either Internaves or Maritima had acted as brokers oragents for PDV Marina/PDVSA. CHO had its own broker,Seascope, so its case in relation to fiduciary duty as a matter of English law depended on satisfying us that Internaves and Maritima had to be treated under English law as a joint intermediary broker.”
“The only thing that was secret about this negotiation from CHO’s perspective was that the hire that it was getting was very significantly less than the hire PDVSA had agreed to pay.”
“CHO was apparently content to agree the commissions and the bottom line hire figure. There was nothing secret about that.”
“140 For us to have concluded that CHO was entitled to avoid these agreements (that they had signed freely and were content to abide by until they learned the full facts of Internaves’ and Maritima’s involvement) we –the majority -concluded it would have been necessary for us to findand hold that Internaves and Maritima had a duty to tell CHO(and not PDVSA) the full facts of the transaction. It was common ground that Internaves and Maritima could not be regarded as CHO’s own brokers, so that seemed to us to mean that for CHO’s defence to these claims to succeed we would have had to have concluded that as intermediarybrokers they were under an obligation to reveal andcommunicate all details of the transaction to both parties. In circumstances where neither CHO nor PDVSA appeared to have been interested (at the time) in the precise amount of the commissions which would be paid to the various brokers involved (and they were aware that this was not just the normal situation with a single broker acting for each of the parties) that was not a proposition that we could accept”
“115. The foundation of this case was that the Claimants were either brokers or agents for PDV Marina/PDVSA or joint brokers for both parties. On the basis of the facts set out above (this being essentially a factual question which turned on the role they had played in the negotiations) we could not accept that either Internaves or Maritima had acted as brokers or agents for PDV Marina/PDVSA. CHO had its own broker, Seascope, so its case in relation to fiduciary duty as a matter of English law depended on satisfying us that Internaves and Maritima had to be treated under English law as a joint intermediary broker.” “84 … the evidence did not support a conclusion that the Claimants were at any time acting as more than mere intermediaries who could not be regarded as the agent of either party to the charterparties.”
“117 It was accepted on behalf of Internaves/Maritima that if they were indeed agents for PDVSA or CHO, then they were under a fiduciary duty not to act for their own benefit (or for the benefit of third parties) without the principal’s informed consent and to act generally in the principal’s best interests. However, any such duties did not, so it was argued, extend to keeping the principal informed about matters which were not its concern (such as, in this case, the amount of hire which CHO would accept). We were referred in this context to the statement in Snell’s Equity at para 7.011 that “Fiduciary duties are fundamentally proscriptive in nature, rather than prescriptive: fiduciary doctrine “tells the fiduciary what he must not do. It does not tell him what he ought to do”. 118 The treatment of this topic in Snell goes on to state (at para 7.008) that: – “The scope of fiduciary duties is “moulded according to the nature of the relationship and the facts of the case”
“…The agreement of the parties or the background of the case may however establish that the relationship is not one of agency or that a fiduciary relationship either did not exist or had been modified from the normal standards” “…The agreement of the parties or the background of the case may however establish that the relationship is not one of agency or that a fiduciary relationship either did not exist or had been modified from the normal standards”
“Turning first to the question of how the incidence of the duties should be explained, it will be noted that the formulations in Article 1 and in the present Article treat the relationship of principal and agent as by definition a fiduciary one, and therefore in effect say that every agent is a fiduciary and hence owes fiduciary duties. This can be criticised on the basis that not every person who can be described by the word “agent” issubject to fiduciary duties; and that a person who certainly is soto be described may owe such duties in some respects and notin others. Hence it is said that there may be a “non-fiduciaryagent”, and that in some functions an acknowledged agent maynot act as fiduciary at all. Rather than talk of a “non-fiduciaryagent” it seems better to say that where an agent does not act ina fiduciary capacity (e.g. because he simply carries out specificinstructions), this is a reflection of the scope of his duties andthe boundaries of the equitable rules.”
“The facts and circumstances must be carefully examined to see whether in fact a purported agent and even a confidential agent is in a fiduciary relationship to his principal. It does not necessarily follow that he is in such a position (see In Re Coomber).”
“It is said that the son was the manager of the stores and therefore was in a fiduciary relationship to his mother. This illustrates in a most striking form the danger of trusting to verbal formulae. Fiduciary relations are of many different types; they extend from the relation of myself to an errand boy who is bound to bring me back my change up to the most intimate and confidential relations which can possibly exist between one party and another where the one is wholly in the hands of the other because of his infinite trust in him. All these are cases of fiduciary relations, and the Courts have again and again, in cases where there has been a fiduciary relation, interfered and set aside acts which, between persons in a wholly independent position, would have been perfectly valid. Thereupon in some minds there arises the idea that if there is any fiduciary relation whatever any of these types of interference is warranted by it. They conclude that every kind of fiduciary relation justifies every kind of interference. Of course that is absurd. The nature of the fiduciary relation mustbe such that it justifies the interference. There is no class ofcase in which one ought more carefully to bear in mind thefacts of the case, when one reads the judgment of the Court on those facts, than cases which relate to fiduciary and confidentialrelations and the action of the Court with regard to them. In my opinion there was absolutely nothing in the fiduciary relations of the mother and the son with regard to this house which in any way affected this transaction.”
“The precise scope of [the obligation] must be moulded according to the nature of the relationship.” according to the nature of the relationship.”
“were not acting as more than mere intermediaries who could not be regarded as the agent of either party to the charterparties.”
“Thereupon in some minds there arises the idea that if there is any fiduciary relation whatever any of these types of interference is warranted by it. They conclude that every kind of fiduciary relation justifies every kind of interference. Of course that is absurd. The nature of the fiduciary relation mustbe such that it justifies the interference”
“…[PDV Marina] were interested only in securing the services of the Vessels for their project at what they considered to be an acceptable price to them. They had left it to the brokers andintermediaries who had become involved in the contractualnegotiations to bring these to a conclusion on such terms asthey (PDV Marina) considered to be of importance (the hire rate clearly being a term of vital importance but not the only term which was important to PDV Marina) and then to sort out the position regarding commissions with CHO…”
“…both [CHO and PDVSA] were intent on ensuring that the “deal” should be closed as soon as possible. Neither would therefore have wanted to put the conclusion of the deal at risk by asking further questions when they had reached a situationin which they had achieved a “bottom line” figure that wasacceptable to each of them... CHO was apparently content to agree the commissions and the bottom line hire figure”
“…neither CHO nor PDVSA appeared to have been interested (at the time) in the precise amount of the commissions which would be paid to the various brokers involved (and they were aware that this was not just the normal situation with a single broker acting for each of the parties)…”
“it seems to me that Howard Houlder were pure intermediaries, that is to say, their only role and authority on behalf of either party was to transmit the communications of the one to the other.”
“The relationship between a solicitor and his client is one in which the client reposes trust and confidence in the solicitor. It is a fiduciary relationship.”
“But this statement of principle does not absolve the court fromdeciding the scope of the fiduciary's obligations. If, in fact, the agent has, in the light of the facts of the case, no obligation to disclose the actual amount of commission he is paid when his principal knows he is being paid by the third party to the transaction, it does not advance the matter to say that, because he is a fiduciary, he must disclose the actual amount he is being paid. It is the scope of the agent's obligation that is important,not the fact that he may correctly be called a fiduciary.”
“108 Professor Gomez, the expert on Venezuelan law instructed on behalf of the Claimants, started by explaining that in his view neither Internaves nor Maritima would be regarded under Venezuelan law as agents or brokers for any whollyowned subsidiary of PDVSA, including PDV Marina… 109 Furthermore, as a matter of principle Professor Gomezexpressed the opinion that Venezuelan law does not view therelationship between a broker or agent and its principal as onethat gives rise to fiduciary relationship. 110 He then considered whether under Venezuelan law, it was a breach of a fiduciary duty for Maritima, Internaves or Lamat to receive payments from CHO of the difference between the charter hire paid by PDV Marina and the net sum received by CHO. He concluded that it was not for the following reasons:… 111. As a matter of Venezuelan law Professor Gomez explained that a person is not required to give information to its counterparty unless such a duty arises under the particular contract, by statute, or, if nondisclosure results in fraud or fundamental error. Since PDV Marina had not requested a cost breakdown of the hire or information on possible commission payments, his view was that neither Maritima nor Internaveshad a duty – legal or contractual – to inform PDV Marina of thepayments it was going to receive from CHO. Lamat had noreason to inform PDV Marina since it was not involved,directly or indirectly, in the negotiations with PDV Marina... 112 Mr. Anzola, on the other hand, started from the position that under Venezuelan law Internaves and Maritima would both be viewed as having acted as brokers for PDVSA/ PDV Marina-essentially it seemed for the reason given above, namely that Maritima had used the words “as brokers only” in communicating with PDV Marina. Given our conclusion that the evidence did not support a conclusion –whether under Venezuelan or under English law –that either Maritima or Internaves was the broker or agent of PDV Marina or PDVSA for our purposes, Mr.Anzola’s evidence was undermined fundamentally”
“33. Certain things are clear. The defendants retained thebroker to act as their agent for a substantial fee. The contract of retainer contained the usual implied terms, but the relationship created was obviously a fiduciary one. As a fiduciary the agent was required to act loyally for the defendants and not puthimself into a position where he had a conflict of interest. Yet he agreed that he would be paid a commission by the other party to the transaction which his clients had retained him to procure. By doing so he obviously put himself into a position where he had a conflict of interest. The defendants wereentitled to expect him to get them the best possible deal, but the broker's interest in obtaining a further commission for himself from the lender gave him an incentive to look for the lender who would give him the biggest commission.” “34. The broker could only have acted in this way if thedefendants had consented to his doing so “with full knowledgeof all the material circumstances and of the nature and theextent of [his] interest”: Bowstead & Reynolds on Agency , 18th ed (2006), art 44, para 6–055-duty to make full disclosure. An agent who receives commission without the informed consent of his principal will be in breach of fiduciary duty. A third party paying commission knowing of the agency will be an accessory to such a breach. The remedies for breach of fiduciary duty are equitable: they of course include rescission and compensation.”
“73. In Keppel v Wheeler[1927] 1 KB 577 estate agents were retained to obtain a purchase for a block of flats. They obtained an offer, subject to contract, from a prospective purchaser, which their client accepted. But before contracts had been exchanged, the agents received a higher offer. The agents did not communicate that offer to their principal. They accepted that while they remained agents, they were under a duty to disclose the existence of the higher offer. But they argued that once they had introduced a willing purchaser, their agency came to an end. This court disagreed; and held that the agency continued until exchange of contracts. It therefore followed that the agents were in breach of duty in failing to disclose the higher offer to their principal. However, despite that breach of duty, the court unanimously held that the agents were entitled to recover their commission.”
“127 Of the three possible English law doctrines which could conceivably have been relevant to this issue which were identified by Counsel for the Claimants, what was described in shorthand terms as the “Patel v Mirza question” was the only one which seemed to us to provide CHO with any real assistance. In that case the claimant attempted to make a claim for repayment of a sum lent under an agreement to enter into a “spread bet” on shares using insider information. This was therefore a case in which the claimant was seeking to recover money which was paid over for an indisputably unlawful purpose. It was therefore an altogether different situation from that which confronted us in the present case. 128. Notwithstanding the ingenuity which was employed on behalf of CHO to persuade us that the conduct of the Claimants in negotiating what DG candidly described as “the deal of a lifetime” was so morally reprehensible that English law could not support the agreements that it led to, we agreed with Counsel for the Claimants that the illegality case as a matter of English law “did not even get off the ground”
“secret commissions…inevitably…undermine trust in the commercial world”: ii) even though PDVSA did know that commission was payable they would have assumed that it was at the “usual” level (around 2.5%) and the commission therefore should be regarded as “secret”; iii) accordingly the Agreements should be unenforceable as a matter of English law since the category of ‘quasi-criminal acts’ includes “fully secret commissions” and “cases of dishonesty or corruption”: Les Laboratoires Servier v. Apotex Inc.[2015] AC 430 at [25]: “The ex turpi causa principle is concerned with claims founded on acts which are contrary to the public law of the state and engage the public interest. The paradigm case is, as I have said, a criminal act. In addition, it is concerned with a limitedcategory of acts which, while not necessarily criminal, canconveniently be described as “quasi-criminal” because theyengage the public interest in the same way. Leaving aside the rather special case of contracts prohibited by law, which can give rise to no enforceable rights, this additional category ofnon-criminal acts giving rise to the defence includes cases ofdishonesty or corruption, which have always been regarded asengaging the public interest even in the context of purely civildisputes; some anomalous categories of misconduct, such as prostitution, which without itself being criminal are contrary to public policy and involve criminal liability on the part of secondary parties; and the infringement of statutory rules enacted for the protection of the public interest and attracting civil sanctions of a penal character, such as the competition law considered by Flaux J in Safeway Stores Ltd v Twigger [2010] Bus LR 974 .”
“42. It follows from all this, in my judgment, that even if the relationship of Medsted and its clients was a fiduciary one, thescope of the fiduciary duty is limited where the principal knowsthat his agent is being remunerated by the opposite party. AsBowstead and Reynolds say, if the principal knows this, hecannot object on the ground that he did not know the preciseparticulars of the amount paid. He can, of course, always askand if he does not like the answer, he can take his businesselsewhere. Bowstead does add that where no trade usage is involved (and no usage was alleged in the present case), the principal's knowledge may require to be "more specific". In Hurstanger the court held that it did need to be more special "because borrowers (such as the Wilsons) coming to the nonstatus market were likely to be vulnerable and unsophisticated". The contrary is the case here since, as the judge found (para 90) the clients were wealthy Greek citizens and it is likely that they were experienced investors (Mr Komninos, for example, had already dealt through MAN).”
“93.We agreed with the Claimants that what the documents made clear was that CHO were interested only in the ‘bottom line’ figure, so that if the effect of taxes of one sort or another was that they would receive less than the ‘headline hire rate’, then the commissions would have to be adjusted accordingly. So far as PDVSA were concerned, the suggestionthat they might not have been aware of the appropriate marketrate was not borne out by the evidence before us…”
"42. Wider policy considerations also support the respondents' case that bribes and secret commissions received by an agent should be treated as the property of his principal, rather than merely giving rise to a claim for equitable compensation. As Lord Templeman said giving the decision of the Privy Council in Attorney General for Hong Kong v Reid[1994] 1 AC 324 , 330H, "bribery is an evil practice which threatens the foundations of any civilised society"
“both [CHO and PDVSA] were intent on ensuring that the “deal” should be closed as soon as possible. Neither would therefore have wanted to put the conclusion of the deal at risk by asking further questions when they had reached a situationin which they had achieved a “bottom line” figure that wasacceptable to each of them. ”
“28. Apart from these decisions, the researches of counsel have uncovered no cases in the long and much-litigated history of the illegality defence, in which it has been applied to acts which are neither criminal nor quasi-criminal but merely tortious or in breach of contract. In my opinion the question what constitutes “turpitude” for the purpose of the defence depends on the legalcharacter of the acts relied on. It means criminal acts, and whatI have called quasi-criminal acts. This is because only acts inthese categories engage the public interest which is thefoundation of the illegality defence. Torts (other than those ofwhich dishonesty is an essential element), breaches of contract,statutory and other civil wrongs, offend against interests whichare essentially private, not public. There is no reason in such acase for the law to withhold its ordinary remedies. The public interest is sufficiently served by the availability of a system of corrective justice to regulate their consequences as between the parties affected.”
“(B) Party A has claims for outstanding hire further to two Charterparties Between Party A and Party B dated22 January 2008 for the ships Amethyst and Turquoise, which Charterparties were assigned by Party B to the Second Defendant by way of a Protocol of Assignment dated6 March 2008 (the Dispute).....”
“This agreement is in full and final settlement of the Dispute, and, upon confirmation by party A pursuant to para. [3.5] above, each party hereby releases and forever discharges, all and/or any actions, claims, rights, demands and set-offs, whether in this jurisdiction or any other, whether or not presently known to the parties or to the law, and whether in law or equity, that it, its Related Parties or any of them ever had, may have or hereafter can, shall or may have against the other party or any of its Related Parties arising out of or connected with: (a) the Dispute; (b) the underlying facts relating to the Dispute; (c) the Proceedings; (d) any agreement between or act by the parties or their Related Parties or any of them; and (e) any other matter arising out of or connected with the relationship between the parties.”
“70. We turn then to CHO’s argument that the sum paid under the Settlement Agreement could not be treated as the equivalent of “Charter Hire” even if unpaid hire represented most of the sum claimed –and therefore settled under the Settlement Agreement. CHO argued that, if we were to conclude that the sum paid under the Settlement Agreement was properly regarded as Charter Hire, then it would be necessary to construct a mechanism so as to separate that part of the US$60 million payment which attracted brokerage commission from that which did not. They emphasised that no evidence to enable us to do so had been adduced. 71. We were referred in this context to a number of authorities including Howard Holder v Manx Isles Steamship[1923] 1 KB 1110 , Shackleton Aviation v Maitland Drewery Aviation Limited [1964] 1 LLR 293, White v Turnbull [1898] 3 Com Cas 183, and a decision of the New York Supreme Court Appellate Division, Tankers International Navigation Corporation v National Shipping & Trading Corp[1986]. CHO extracted from these decisions the following propositions in the context of the present dispute: (i)That, in the absence of clear words, a broker will be unable to claim commission where the underlying contract pursuant to which commission was payable has been superseded by another –albeit related -contract; (ii) That it was necessary to show that any right to commission attached to the “wholly distinct bargain” (in this case the Settlement Agreement); and (iii) That CHO was perfectly entitled to conclude the Settlement Agreement even though one of its (intended) effects might have been to deprive the Claimants of their commission. The Settlement Agreement was a genuine attempt to compromise the underlying claims, then sums paid under it had to be treated as being paid under a wholly separate agreement. The fact that in a particular case this might lead to the loss of an entitlement to substantial commission was, so it was argued, not a reason to ignore these principles. 72. We do not propose to add to the length of these reasons by considering these authorities in detail. We agreed with the Claimants that the short point was that none of the cases to which we were referred actually concerned the situation which confronted us in the present case where: (i) There was a written agreement between the owner and the broker for the payment of commission; and (ii) A sum had actually been paid to the owner. 73. Counsel for the Claimants identified the following salient features of the present case which distinguished it from the authorities under consideration. These were as follows: (i) The Settlement Agreement provided for the settlement of the ‘Dispute’. That was defined as “claims for outstanding hire” –rather than ‘claims for outstanding hire and other amounts’; (ii) On receiving the amount paid under the Settlement Agreement, CHO’s Board of Directors had expressly confirmed that the sum received as “$60m of outstanding charter hire”; (iii) The inescapable fact was that CHO had paid commission (to Seascope) on the sum paid under the Settlement Agreement pursuant toa commission agreement in materially identical terms to those relied on by the Claimants in this arbitration and had done so without any hesitation. All of these points seem to us to reinforce the conclusion thatthe Settlement Agreement was not intended to extinguish anyaccrued entitlement the claimants might have to commission onCharter Hire.”
“36.9 It is clear from the express terms of Clauses 27 and 28 of the New York Produce form that commission is payable only on hire which is both earned and paid under the charter or under any continuation or extension of it. If hire is not paid for the full period of the charter, whether, for example, because of off-hire or because of early termination, the broker does not earn his commission. 36.10 In such circumstances, the question may arise whether any term is to be implied into the agreement between owners and their broker, to the effect that the owners will do nothing to deprive the broker of the commission which he would otherwise earn. The answer is not entirely clear. The House of Lords decided in French v Leeston Shipping (1922) 10 Ll. L. Rep 448 that no undertaking is to be implied that the owners will not agree to terminate the charter.”
“36A.7 In Tankers Int’l, above, the broker claimed commissions on funds paid by the charterer to the owner to settle the latter’s claim for unpaid hire. While the court stated that a factual question was raised as to whether the obligation to pay commissions survived the charterer’s default, the court observed that as a matter of law, the payment of settlement funds was not the equivalent of the payment of hire as earned under the charter. According to the court: Even had the shipowners recovered the full amount of hire sought by their claims, it is well settled that a broker is not entitled to recover commissions merely because his principal has secured a benefit equivalent to what he would have received had the contract been performed. [499 N.Y.S. 2d at 701]”
“36A.5 The broker’s entitlement to commissions is entirelydependent upon the language of the contract authorizingthe commissions. Unless the charter provides otherwise, the broker may recover commissions only to the extent that hire is actually paid under the charter.”