Rimpacific Navigation Inc v Daehan Shipbuilding CoLtd

Ostensible authority to execute a guarantee is governed by the law applicable to the guarantee contract. A person who signs a guarantee as the chief executive officer of the apparent corporate guarantor will generally have ostensible authority where the surrounding evidence does not put the beneficiary on notice of a limitation on that authority. Subsequent evidence must be assessed against the earlier jurisdiction findings, but will not displace them unless it materially changes the evidential position. Where damages for terminated charterparties have been crystallised by assessing replacement charter rates, a later sale of the vessels does not reduce the recoverable loss.

The claimants, owners of two vessels, sued the defendant on guarantees of liabilities incurred by the charterer, Daehan Shipping Co Ltd. The defendant did not appear at trial. It had previously challenged jurisdiction, but Steel J dismissed that application in a reasoned decision reported at [2010] 2 Ll.Rep. 236. The court was required to decide whether later evidence from parallel Korean proceedings altered the earlier conclusions on ostensible authority and, alternatively, whether the guarantees were enforceable under Korean law. It also had to determine the quantum of damages, including the effect of the claimants’ subsequent sale of the vessels.

1. Judgment for the claimants. The court proceeded in the defendant’s absence because the defendant had notice of the hearing and the evidence relied upon.
2. The appropriate approach was to begin with the conclusions reached by Steel J on the jurisdiction application, reached after hearing both parties, and then consider whether the additional Korean material justified a different view.
3. Ostensible authority was governed by the law applicable to the guarantee contracts. The guarantees were signed by Ie Su Oh as chief executive officer of the defendant. The additional evidence did not establish that the claimants knew, or were put on notice, that he lacked authority. He therefore had ostensible authority to sign the guarantees for the defendant.
4. The court also found, although it was unnecessary to decide the point, that the guarantees would have been enforceable under Korean law. The evidence did not show knowledge or gross negligence by the claimants concerning the absence of board approval for an interested director transaction.
5. The damages proved by reference to arbitration awards against the charterer were recoverable. The subsequent sale of the vessels was irrelevant because the loss had already been crystallised by the orthodox comparison between lost charter rates and available replacement rates.
6. Damages were awarded in the sums proved, together with interest. The costs of the actions remained to be assessed.

The judgment describes an earlier jurisdiction decision by Steel J, reported at [2010] 2 Ll.Rep. 236. Permission to appeal that decision was refused by the Court of Appeal. This was the trial judgment on liability and quantum.