KYLA SHIPPING CO LTD & Anor v FREIGHT TRADING LTD & Ors

An agent managing a principal’s trading portfolio owes undivided fiduciary loyalty. The agent must act honestly in the principal’s best interests, avoid conflicts, and take no profit beyond any expressly and informedly authorised remuneration. Where an agent acts for several principals, that duty remains undiminished. A trade entered into in breach of the agent’s mandate is unauthorised and void where the relevant legal relationship so provides.

For limitation purposes, reasonable diligence under section 32 of the Limitation Act 1980 applies throughout the discovery inquiry. A claimant must be reasonably attentive to circumstances suggesting that something has gone wrong, and must then pursue what a reasonably diligent investigation would reveal. A claimant need not suspect a legal claim, but substantial unexplained losses may themselves require investigation.

The claimants alleged that CTM acted as Kyla’s fiduciary agent in arranging forward freight agreement trades, using Freight Trading Ltd as a front to the market. They alleged that CTM instead profited for FTL, transferred FTL’s adverse positions to Kyla, and traded against Kyla’s interests.

The court found that CTM had acted as Kyla’s portfolio manager and agent, that the disputed trades were unauthorised and void, and that FTL, Mr Cafiero and, in relation to two trades, CTP were liable for dishonest assistance. The central issue was whether the claims, issued in June 2019, were saved by section 32 of the Limitation Act 1980.

1. Agency and fiduciary duties. CTM was Kyla’s fiduciary agent. Its mandate was to trade in the market for Kyla’s account, using FTL as a front, and to pass through the market terms subject to an agreed US$500-per-day margin. CTM owed duties of good faith, loyalty, avoidance of conflicts and no unauthorised profit: [294]-[302].
2. CTM’s multiple roles did not diminish its duty to each principal. It had to serve each principal faithfully and loyally. Any conflict or profit required the principal’s express and informed consent, and the burden of proving that consent rested on the agent: [297]-[301].
3. Trades involving unauthorised skimming, off-loading of FTL positions, or trading against Kyla were breaches of mandate and fiduciary duty. The disputed FFAs were therefore null and void, subject to the authorised US$1,000-per-day margin on the final close-out trade: [303]-[307].
4. FTL, Mr Cafiero and CTP were liable for dishonest assistance on the relevant trades. Mr Cafiero’s knowledge was attributable to FTL and CTP in the circumstances. His guilty knowledge was not attributed to Kyla, which was the victim of his misconduct: [311]-[322].
5. Limitation. Section 32 postpones limitation only until the fraud, concealment or mistake is discovered, or could with reasonable diligence have been discovered. The claimant must be reasonably attentive to matters a person in its position would learn, and must then pursue what a reasonably diligent investigation would reveal. The inquiry is objective but fact-sensitive and applies at both stages: [325]-[336].
6. The exceptional scale of Kyla’s unexplained losses was itself sufficient to prompt a reasonably diligent investigation. The claimants could have asked when and how the principal loss-making trade was placed and identified its matching market trade. That inquiry would have exposed CTM’s disloyal conduct well before June 2013. The claims were consequently time barred and dismissed: [337]-[357].

First-instance decision. The judgment records no prior appellate decision.