Actual Authority, Not Ostensible Authority: The Court of Appeal Re-Defines the Limits of Undisclosed Principal Liability under Letters of Indemnity

1. Introduction

In Berge Bulk Shipping PTE Ltd v Taumata Plantations Ltd & Ors [2025] EWCA Civ 876 the Court of Appeal was asked to determine whether three New Zealand forestry companies (“the Exporters”) could be sued in England on two Letters of Indemnity (“LOIs”) that contained English jurisdiction clauses. The LOIs had been issued by a now-insolvent intermediary, TPT Shipping Ltd (“Shipping”), in favour of Berge Bulk Shipping PTE Ltd (“Berge Bulk”), the disponent owner of two vessels. Berge Bulk argued that the Exporters were liable as Shipping’s undisclosed principals; the Exporters contended that Shipping had acted on its own account and without the requisite authority.

At first instance, Christopher Hancock KC held that there was no “good arguable case” that the Exporters were liable on the LOIs. Berge Bulk appealed. The Court of Appeal (Males, Falk and Zacaroli LJJ) dismissed the appeal, laying down fresh guidance on:

What constitutes a “good arguable case” for jurisdiction under CPR 6.33(2B) when reliance is placed on a jurisdiction clause contained in an LOI;
The evidential burden for showing that a company which signs a contract in its own name was in truth acting as an agent for an undisclosed principal; and
The absolute requirement for actual (as opposed to ostensible or “fictional”) authority before an undisclosed principal can be sued, especially in the LOI context.

2. Summary of the Judgment

The Court of Appeal affirmed the judge’s finding that Berge Bulk failed to establish a “good arguable case” that the Exporters were undisclosed principals either under the voyage charterparties or under the LOIs. Key conclusions were:

Shipping contracted as principal, not as agent—its creation was intended to “ring-fence” risk away from the Exporters.
Even if Shipping sought the Exporters’ approval before issuing LOIs, the governing Agency Agreements imposed strict procedures (Appendix 2) that were never followed; therefore Forests (the marketing agent) had no actual authority to bind the Exporters.
Ostensible (apparent) authority will not suffice to make an undisclosed principal liable. The court rejected Berge Bulk’s attempt—raised for the first time on appeal—to convert ostensible authority into actual authority via estoppel (relying on AJU Remicon).
Because the undisclosed-principal argument failed, the English jurisdiction clauses in the LOIs could not be relied on against the Exporters, and service out of the jurisdiction was set aside.

3. Analysis

3.1 Precedents Cited and Their Influence

(a) Clifford Chance LLP v Société Générale SA [2023] EWHC 2682 (Comm)
Re-stated the three-limb test for a “good arguable case” on jurisdiction agreements. Males LJ quoted it verbatim (para 5) and applied each limb to decide whether Berge Bulk had the “better but not much better” argument.

(b) Siu Yin Kwan v Eastern Insurance [1994] 2 AC 199
Provided the canonical five-point summary of the law on undisclosed principals. The Court adopted Lord Lloyd’s formulation, highlighting the requirement of actual authority (paras 7–9).

(c) Playboy Club London Ltd v Banca Nazionale del Lavoro [2018] UKSC 43
Cited for the principle that liability is “mutual” and that a third party must irrevocably elect whom to sue. Lord Sumption’s critique of the doctrine’s coherence influenced the Court’s reluctance to expand the rule via estoppel (paras 8, 77).

(d) The Magellan Spirit [2016] EWHC 454 (Comm)
Leggatt J’s presumption that a named contracting party is principal unless “convincing proof” rebuts the appearance of sole agency was adopted and “unpacked” (paras 10–12, 60–63).

(e) AJU Remicon Co Ltd v Alida Shipping Co Ltd [2007] EWHC 2246 (Comm)
Suggested that ostensible authority might morph into actual authority through estoppel. Males LJ distinguished it, holding the doctrine cannot apply where an undisclosed principal is invoked (paras 70–78).

Additional citations – Garnac Grain, Armstrong v Stokes, Bowstead & Reynolds, The Aramis, Dinglis Management – provided doctrinal backdrop on agency.

3.2 Court’s Legal Reasoning

Purpose and contractual matrix: Documentary evidence (letters, Agency Agreements) showed Shipping was set up to insulate the Exporters from chartering risk. That commercial purpose was “inconsistent with any intention that Shipping should act as agent” (para 60).
Textual analysis: Clause 5.2.1 of the Agency Agreements drew a deliberate distinction—when Forests booked vessels directly (cl. 5.2.1(c)) it did so “on behalf of” the Exporters; when Shipping provided a vessel (cl. 5.2.1(f)), there was no such wording. The omission was considered “striking.”
Timing factor: Shipping often fixed vessels before knowing which Exporter’s cargo (if any) would be used; such uncertainty undermined the idea that it was committing an unnamed principal (para 64).
Lack of actual authority for LOIs: Appendix 2 required a formal Request for Authorisation signed off by the Exporters’ manager, Manulife. Forests never invoked this mechanism. Therefore no actual authority—express or implied—could be inferred (paras 67–69).
Rejection of ostensible authority: (i) New point raised too late; (ii) No evidence of reliance by Shipping; (iii) Even if present, estoppel cannot create liability of an undisclosed principal because “mutuality” would be lost (paras 72–78).
Application of the “good arguable case” test: Berge Bulk failed limb (i) (better argument) and limb (ii) (court able to form reliable view) because the documentary matrix favoured the Exporters. Limb (iii) (plausible basis where reliable assessment impossible) did not arise.

3.3 Potential Impact

Shrinking the scope of undisclosed principal doctrine: Requiring genuine actual authority, the decision limits tactical attempts to bypass insolvent intermediaries by “pushing up the chain”.
LOI market implications: Shipowners cannot assume that cargo interests behind an intermediary will be liable under an LOI unless the intermediary held demonstrable actual authority.
Jurisdictional strategy: Parties invoking CPR 6.33(2B) must marshal robust evidence early; ostensible-authority arguments may fail to confer jurisdiction where actual authority is missing.
Appellate practice: Confirms that new agency theories raised for the first time on appeal will rarely be permitted, especially where evidence gaps would prejudice other parties (The Dijilah applied).
Contract drafting: Expect tighter wording in shipping service frameworks clarifying whether intermediaries may issue LOIs and on whose behalf, plus insertion of indemnities to mitigate insolvency risk.

4. Complex Concepts Simplified

Undisclosed Principal: A person (principal) for whose benefit a contract is made by an agent acting in their own name. Once revealed, the principal may both sue and be sued on that contract if the agent had actual authority.

Actual vs Ostensible Authority:
• Actual – The principal expressly or impliedly agrees that the agent may act. Evidence can be words or conduct.
• Ostensible/Apparent – The principal holds out the agent as having authority; a third party relies on the representation. Creates an estoppel; it does not of itself bind an undisclosed principal in English law following this case.

Letter of Indemnity (LOI): An instrument by which a carrier delivers cargo without bills of lading, receiving an indemnity from the party requesting delivery. Common when documents are delayed but cargo must discharge.

Good Arguable Case (Jurisdiction): A flexible standard—“better, though not much better, argument on the material available.” If facts are unclear, a plausible evidential basis may suffice, but the court will attempt to reach a view if feasible.

Ring-fencing Risk: Corporate structuring to isolate liabilities (e.g., charterparty exposure) within a dedicated subsidiary, protecting parent or related companies.

5. Conclusion

Berge Bulk v Taumata is now the leading English authority holding that only actual authority can trigger undisclosed-principal liability on LOIs and similar contracts. Ostensible authority—no matter how compelling—cannot substitute for the principal’s genuine consent to be bound, and cannot be invoked to found English jurisdiction under CPR 6.33(2B). The decision tightens the evidence threshold for claimants seeking to leapfrog insolvent agents and pursue cargo interests directly. It also signals the Court of Appeal’s continued scepticism toward expanding the anomalous doctrine of undisclosed principals.

Practically, shipowners, charterers, and commodities traders must ensure that any LOI chain accurately reflects the lines of actual authority and should cascade contractual indemnities down the supply chain rather than rely on agency constructs that may unravel under judicial scrutiny.