Factual and Procedural Background
The appellant, the disponent owner of two vessels, brought claims under two Letters of Indemnity (LOIs) governed by English law, which provided for the jurisdiction of the English court. The LOIs were issued by a now insolvent New Zealand company, Shipping, and the question was whether the English court had jurisdiction based on whether three New Zealand companies (the Exporters) were liable as Shipping's undisclosed principals. The judge held there was no good arguable case that the Exporters were undisclosed principals and therefore no jurisdiction. The appellant appealed this decision.
The issue was examined in two stages: whether the Exporters were undisclosed principals under the voyage charters and whether they were undisclosed principals under the LOIs themselves, with the latter being the decisive issue. The Exporters also contended that even if they were undisclosed principals, the appellant had made a binding election to seek a remedy only against Shipping, or that the right to claim against the Exporters was extinguished, but the judge did not address these points as they were obiter.
The background involves the Exporters owning or having logging rights over forestry plantations in New Zealand, with Forests acting as their exclusive sales and marketing agent for export logs. Forests previously acted as agent under charterparties with shipowners. In 2004, Shipping was established within the TPT Group to undertake vessel chartering, purportedly to ring fence risks from Forests and the Exporters. Agency Agreements governed the relationship between Forests and the Exporters, specifying limited authority for Forests to bind the Exporters, and a procedure for issuing LOIs requiring Exporters' approval through Forests.
Shipping and Forests entered into a Shipping Services Agreement in 2012, under which Shipping provided shipping services for the Exporters, with Forests acting as agent for the Exporters. Shipping carried a majority of the Exporters’ logs but also operated independently. Bills of lading were often unavailable at discharge ports, necessitating LOIs to enable cargo discharge.
The two shipments at issue, COSMOS HARMONY and TS INDEX, involved voyage charters between the appellant and Shipping, sale contracts with a buyer, and LOIs issued by Shipping to the appellant to permit discharge without original bills of lading. Forests approved the LOIs without following the stipulated procedure and without seeking Exporters’ approval. Disputes arose post-discharge leading to claims and Shipping’s insolvency. The appellant joined proceedings claiming against Shipping, Forests, and the Exporters under the LOIs, relying on the Exporters being undisclosed principals to establish jurisdiction of the English court.
The judge held there was no good arguable case that Forests was an undisclosed principal and preferred the Exporters’ case that Shipping acted as principal, not agent, under the charterparties and LOIs. The appellant challenged this conclusion on appeal.
Legal Issues Presented
- Whether the English court has jurisdiction over claims under the LOIs based on the Exporters being liable as Shipping’s undisclosed principals.
- Whether there is a good arguable case that the Exporters were undisclosed principals under the voyage charters and the LOIs.
- Whether the appellant’s claim against the Exporters is barred by election or extinguished by acceptance of the claim by Shipping’s liquidators (raised but not decided).
- Whether Forests had actual or apparent authority to bind the Exporters to issue LOIs.
- Whether a new point regarding ostensible authority can be raised on appeal.
Arguments of the Parties
Appellant's Arguments
- Before Shipping was established, Forests acted as agent for the Exporters in charterparties.
- Shipping took over the role previously performed by Forests, also acting as agent for the Exporters.
- Clause 5.1 of the Shipping Services Agreement stating Shipping would provide services "for and on behalf of" the Exporters indicates classic agency.
- The flow of funds shows the Exporters, not Shipping, had the economic interest in the charterparties, bearing freight and demurrage costs and receiving commissions.
- Shipping’s accounts do not reflect it acting as principal, as freight and costs paid to the appellant were not recorded as expenses or income as would be expected.
- If there is a good arguable case that the Exporters are undisclosed principals to the charterparties, the same applies to the LOIs since the Exporters benefit from avoiding demurrage.
- Although the Appendix 2 procedure for issuing LOIs was not followed, it may have fallen into disuse, so Forests had actual authority to authorise LOIs without Exporters’ approval.
- Alternatively, relying on the AJU Remicon case, Forests had apparent or ostensible authority to authorise LOIs on behalf of the Exporters, which should be treated as actual authority.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Clifford Chance LLP v Société Générale SA [2023] EWHC 2682 (Comm) |
Definition and application of the "good arguable case" test for establishing jurisdiction under CPR 6.33(2B). |
The court adopted the summary of the good arguable case test as guiding the jurisdiction analysis in this appeal. |
| Garnac Grain Co Inc v HMF Faure & Fairclough Ltd [1968] AC 1130 |
Agency requires mutual consent objectively determined; consent may be express or implied from conduct. |
Used to explain the requirement of consent for agency and the assessment of conduct to establish agency. |
| Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199 |
Summary of the undisclosed principal rule, including the conditions under which an undisclosed principal may sue and be sued. |
The court relied on Lord Lloyd’s summary to define the scope and requirements of the undisclosed principal doctrine. |
| Playboy Club London Ltd v Banca Nazionale del Lavoro SpA [2018] UKSC 43 |
Confirmed the undisclosed principal rule and emphasized the third party’s irrevocable election to sue agent or principal. |
The court cited this to reinforce the mutual and consensual nature of the undisclosed principal relationship. |
| The Magellan Spirit [2016] EWHC 454 (Comm), [2017] 1 All ER (Comm) 241 |
Presumption against finding undisclosed principal status unless convincing proof is shown; agency relationship implied only if conduct is only consistent with agency. |
Applied to assess the evidential standard and conduct necessary to establish agency in the context of undisclosed principals. |
| Dinglis Management Ltd v Dinglis Properties Ltd [2019] EWCA Civ 127 |
Consent of the principal is a highly material factor in determining agency relationships. |
Used to support the conclusion that the Exporters did not consent to Shipping acting as their agent. |
| Rochdale Metropolitan Borough Council v Dixon [2011] EWCA Civ 1173, [2012] PTSR 1336 |
Interpretation of phrases "for" and "on behalf of" may have general meanings not limited to agency. |
Supported the court’s interpretation that the Shipping Services Agreement language was not conclusive of agency. |
| AJU Remicon Co Ltd v Alida Shipping Co Ltd [2007] EWHC 2246 (Comm) |
Under estoppel, ostensible authority may be treated as actual authority in certain agency contexts. |
The appellant relied on this case to argue apparent authority for Forests to authorise LOIs; the court rejected this on appeal. |
| The Dijilah [2024] EWCA Civ 580, [2025] 1 All ER (Comm) 97 |
Principles governing raising new points on appeal, especially where new evidence might affect outcome. |
Applied to refuse permitting the appellant to raise the ostensible authority point not taken below. |
| Rana v Ealing London Borough Council [2018] EWCA Civ 2074, [2019] 1 All ER 1078 |
Same principles as The Dijilah apply to interlocutory appeals regarding new points. |
Supported the court’s decision to disallow the new point on ostensible authority. |
Court's Reasoning and Analysis
The court began by affirming the applicable test for jurisdiction under CPR 6.33(2B) as the "good arguable case" standard. It then examined the undisclosed principal rule, emphasizing the need for mutual consent objectively determined and that an agent must act within actual authority. The court noted the presumption that a named contracting party is principal unless convincing proof shows otherwise.
The court analyzed the contractual and factual background, including the Agency Agreements and Shipping Services Agreement, finding that the establishment of Shipping aimed to ring fence risks from both Forests and the Exporters, inconsistent with Shipping acting as agent for the Exporters. The Agency Agreements drew a clear distinction between Forests acting as agent and Shipping acting as principal when involved in charterparties.
The court rejected the appellant’s reliance on certain contractual language as not conclusively indicating agency, interpreting "for and on behalf of" as potentially meaning "for the benefit of." It found that economic interest flowing to the Exporters and Shipping’s accounting treatment were neutral or consistent with Shipping acting as principal indemnified by the Exporters.
The timing of the charterparties, often concluded before sale contracts and before cargo ownership was fixed, further supported Shipping acting as principal rather than agent. The court concluded there was no good arguable case that the Exporters were undisclosed principals under the charterparties.
Regarding the LOIs, the court held that since Shipping acted as principal under the charterparties, it was powerful evidence that the LOIs were also issued by Shipping as principal. Even if this was mistaken, the court found no objective consent by the Exporters or Shipping to an agency relationship for issuing the LOIs. Forests did not follow the required procedure to authorise LOIs, and the Exporters did not consent to LOIs being issued on their behalf.
The appellant’s argument that the Appendix 2 procedure had fallen into disuse was speculative and unsupported. The new argument relying on apparent or ostensible authority was rejected as it was not raised below, lacked evidential basis, and conflicted with the nature of the undisclosed principal doctrine, which requires actual authority. The court emphasized that extending the doctrine to include estoppel-based fictional authority would undermine its mutuality and coherence.
Accordingly, the court found the Exporters had the better argument that they were not liable as undisclosed principals on the LOIs, and the English court lacked jurisdiction.
Holding and Implications
The court DISMISSED THE APPEAL.
The direct effect is that the English court does not have jurisdiction over the claims against the Exporters under the LOIs, as there is no good arguable case that the Exporters are undisclosed principals liable under those LOIs. The appellant’s challenge to the jurisdiction decision was rejected. No new precedent was established; the decision affirms the application of established principles governing undisclosed principals, agency consent, and jurisdiction under contractual jurisdiction clauses.