Sino Channel Asia Ltd v Dana Shipping & Trading PTE Singapore & Anor

Implied actual authority to receive service of originating process is legally possible, but it requires close scrutiny of the particular relationship between principal and agent. A wide commercial authority does not automatically confer that authority. The court must examine the parties’ actual arrangements and conduct, including whether the principal effectively delegated responsibility for the relevant contract and expected the agent to deal with disputes. Ostensible authority depends on a representation attributable to the principal. That representation may arise from the principal’s conduct and acquiescence in the agent’s position. In an exceptional case, the same facts may establish both forms of authority. A party who has not participated in an arbitration may rely on the statutory right to challenge jurisdiction before enforcement, and conduct seeking practical resolution of an award does not, without more, amount to ratification.

Sino had signed a contract of affreightment with Dana but had taken no part in its negotiation or performance. In reality, Sino had lent its name to Beijing XCty Trading Limited, which handled the commercial dealings through its employee or representative, Mr Cai. Dana served its notice of arbitration on Mr Cai, but Sino did not participate in the arbitration. The arbitrator proceeded and made an award in Dana’s favour.

Sino successfully applied under section 72(1)(b) and (c) of the Arbitration Act 1996 for declarations that the tribunal was improperly constituted and that the award was made without jurisdiction: [2016] EWHC 1118 (Comm). Dana appealed. The central questions were whether Beijing XCty or Mr Cai had implied actual authority or ostensible authority to receive the notice, and, if not, whether Sino had ratified its receipt.

1. Appeal allowed. The court held that Beijing XCty had implied actual authority to receive the notice of arbitration on Sino’s behalf, and that service on Mr Cai was effective service on Beijing XCty under section 76(3) of the Arbitration Act 1996. The tribunal was therefore properly constituted and the award was made with jurisdiction.
2. Implied actual authority to accept originating process is not excluded as a matter of law, but it is a serious and distinct form of authority. Its existence requires intense scrutiny of the particular, probably rare, facts and an inference from the actual circumstances of the principal-agent relationship. The court endorsed the relevant principles in The Lake Michigan, while distinguishing that case’s limits on the authority of a P&I Club or solicitor from the unusual relationship between Sino and Beijing XCty.
3. The decisive circumstances were Sino’s complete passivity and delegation. Sino accepted liability under the contract of affreightment, imposed no requirements or safeguards concerning its negotiation or performance, and treated Beijing XCty as the party responsible for the contract. Sino’s conduct showed that it expected Beijing XCty to deal with any notice and protect it from liability. Triton’s passing of the notice to Beijing XCty strongly reinforced that inference.
4. Ostensible authority was also established. It rests on a representation attributable to the principal, which may be inferred from the principal’s conduct in placing the agent in a position to hold itself out and acquiescing in that conduct. Sino’s conduct of its relationship with Beijing XCty, together with Triton’s conduct, gave Dana the appearance that Beijing XCty and Mr Cai were to be dealt with for all purposes, including receipt of the notice. The court treated the case as an exceptional instance in which actual and ostensible authority coincided.
5. Ratification did not arise on the facts as a basis for the decision. If authority had not existed, Sino’s conduct after receiving the award was not unequivocal adoption of the notice. Seeking to have Mr Zhou or Beijing XCty honour the award was compatible with maintaining a jurisdictional objection. Section 72 of the Arbitration Act 1996 also permitted a person who had not participated in the arbitration to await enforcement proceedings before taking action, so silence could not amount to ratification.
6. The court differed from the Judge on Issues I and II. It would have dismissed Dana’s case on Issue III. The parties were to assist in drawing up an order giving effect to those conclusions.

• Court of Appeal (Civil Division): The appeal was allowed. The court held that the arbitral tribunal was properly constituted and that the award was made with jurisdiction: [2017] EWCA Civ 1703.
• High Court of Justice, Queen’s Bench Division, Commercial Court: Sir Bernard Eder held in favour of Sino, set aside the award, and declared that the tribunal was not properly constituted and that the award was made without jurisdiction: [2016] EWHC 1118 (Comm).