MSH Ltd v HCS Ltd

An undisclosed principal may enforce and be liable under an ordinary commercial contract where the agent acted within actual authority, intended to act for the principal, and the contract or circumstances do not exclude the doctrine. The burden of establishing those matters is not usefully described as a “heavy” one. Contractual terms form part of the evidential assessment of agency and intention, but exclusion of the doctrine is ordinarily infrequent and requires sufficiently clear wording or circumstances. Standard clauses concerning assignment, confidentiality and entire agreement will not usually suffice in a commodity sale contract. The court must assess the whole evidential picture, including inherent probabilities.

MSH Ltd applied under section 67 of the Arbitration Act 1996 to challenge the majority arbitral award for lack of substantive jurisdiction. The underlying contract concerned the sale and purchase of Colombian nut coke. MSH Ltd was the named seller and CTW Ltd was the named buyer. HCS Ltd contended that CTW Ltd had contracted as its agent and that HCS Ltd was therefore an undisclosed principal.

The court conducted a rehearing on the evidence adduced in the arbitration. The issues were whether CTW Ltd was able to transact for HCS Ltd, when the contract was concluded, whether CTW Ltd had authority at the relevant time, and whether the contract excluded enforcement by an undisclosed principal.

1. Disposition. MSH Ltd’s challenge under section 67 of the Arbitration Act 1996 failed.
2. The governing requirements were that CTW Ltd contracted within the scope of HCS Ltd’s actual authority, intended to contract on HCS Ltd’s behalf, and that neither the contract nor its surrounding circumstances excluded the undisclosed principal doctrine. The burden rested on HCS Ltd, but there was no utility in characterising it as a heavy burden.
3. The evidence established that CTW Ltd’s business model was generally agency-based in dealings with HCS Ltd. “Front-to-back” transactions required deal-by-deal approval. The court found that CTW Ltd intended to act for HCS Ltd and was specifically authorised to enter the contract by 28 September 2020. That conclusion was supported by the parties’ dealings, the financing arrangements, later communications and inherent probabilities.
4. The signed contract was executed and exchanged on 13 and 14 October 2020. Its entire agreement clause superseded any earlier incomplete agreement within the category described in Pagnan v Feed Products. Nevertheless, authority obtained before the final written bargain took effect could support the undisclosed principal doctrine. The rule in Keighley, Maxsted & Co v Durant should not be extended beyond its existing scope. In any event, the court would have found that authority was granted during the WhatsApp exchanges of 12 and 13 October.
5. The contract did not impliedly exclude HCS Ltd’s rights and liabilities as undisclosed principal. It was a non-relational commodity sale, vicarious performance was inherent, and HCS Ltd was identified as the nominee responsible for opening the letter of credit. The assignment, confidentiality and entire agreement clauses added little to the evidential mix. Clearer wording would have been required to exclude the doctrine.