Paul Bugden, Bugden + Co., London
Ref: Berge Bulk Shipping PTE Ltd v Taumata Plantations Ltd [2025] EWCA Civ 876
The issue in this appeal was whether the English court had jurisdiction in respect of claims brought by the appellant, the disponent owner of two vessels, under two Letters of Indemnity (‘LOIs’) provided in order to enable cargoes of timber to be discharged in India without production of the bills of lading. The LOIs, which were governed by English law and provided for the jurisdiction of the English court, had been issued by and in the name of New Zealand company called TPT Shipping Ltd (‘Shipping’) which later became insolvent.
Whether the English court had jurisdiction depended on whether there was a good arguable case that the respondents, three New Zealand companies (together ‘the ‘Exporters’), were liable on the LOIs as Shipping’s undisclosed principals. The trial judge held that there was no such case so that in consequence the English court had no jurisdiction to try the claims. The appellant unsuccessfully challenged that conclusion on this appeal.
The undisclosed principal rule in agency
An agent who concludes a contract with a third party in his own name may bind his principal, so that the principal (as well as the agent) is both entitled to sue on the contract and liable on it, even though the fact that the contract was being concluded on behalf of a principal was not disclosed to the third party at the time. However agency is a consensual relationship which depends upon the consent of both parties, the existence of such consent being determined objectively. The liability of an undisclosed principal arises only when the agent has actual authority to conclude a contract on behalf of the principal. In Playboy Club London Ltd v Banca Nazionale [2018] UKSC 43, [2018] 1 WLR 4041 Lord Sumption described the undisclosed principal rule as ‘an anomalous legacy of eighteenth and nineteenth century jurisprudence, which survives in the modern law on account of its antiquity rather than its coherence’ but nevertheless it survives in the modern law and has been said to be based on sound commercial and practical good sense.
The law was described by Lord Lloyd in Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199 PC, 207 in the following terms: ‘The main features of the law relating to an undisclosed principal have been settled since at least at the end of the 18th century. A hundred years later, in 1872, Blackburn J said in Armstrong v Stokes (1872) LR 7 QB 598, 604 that it had often been doubted whether it was originally right to hold that an undisclosed principal was liable to be sued on the contract made by an agent on his behalf, but added that “doubts of this kind come now too late”. For present purposes the law can be summarised shortly. (1) An undisclosed principal may sue and be sued on a contract made by an agent on his behalf, acting within the scope of his actual authority. (2) In entering into the contract, the agent must intend to act on the principal’s behalf. (3) The agent of an undisclosed principal may also sue and be sued on the contract. (4) Any defence which the third party may have against the agent is available against his principal. (5) The terms of the contract may, expressly or by implication, exclude the principal’s right to sue and his liability to be sued. The contract itself, or the circumstances surrounding the contract, may show that the agent is the true and only principal.’
The undisclosed principal rule will only ever be relevant when there is nothing in the terms of the contract or surrounding circumstances to indicate to the other contracting party that the named person is making the contract as an agent. If it were otherwise, the principal would not be undisclosed. In such a case, the starting point is that the named person is not making the contract as an agent, but it is open to the undisclosed principal or, as in this case, the third party to seek to prove otherwise. The proof of agency must be convincing because unconvincing proof (if such a thing is possible at all) would not be much use to show that the contract is not what it appears to be.
The Facts
For many years the Exporters had owned, or had logging rights over, forestry plantations in New Zealand. They do not manage these forests themselves, such management being undertaken by a company called Manulife, which is also responsible for the sale and marketing of logs to customers in New Zealand.
The sale and marketing of logs for export was originally carried out by a company called TPT Forests Ltd (‘Forests’), with the relationship between Forests and each of the Exporters being governed by Log Marketing and Sales Agency Agreements. Those Agency Agreements made it clear that, in everything it did pursuant to the agreements, Forests acted as the agent of the Exporters. That included the chartering of vessels for the carriage of logs from New Zealand to the export markets. Before Shipping came on to the scene, the Exporters were clearly therefore the principals of Forests under charterparties concluded in the name of Forests, apparently without disclosure to the shipowners that Forests was acting as an agent.
In 2004 the TPT Group, of which Forests was a part, decided that a new company should be established to undertake the chartering of vessels for the carriage of the Exporters’ logs. The purpose of establishing Shipping was that the risks inherent in chartering vessels would be retained by Shipping, which would act as the charterer of the vessels concerned.
New agency agreements were concluded between the Exporters and Forests. These appointed Forests as the exclusive sales and marketing agent for the sale of all export logs and contemplated two possible ways in which shipments of logs might be arranged. The first, was that (as had been the practice before the establishment of Shipping) Forests would conclude a charterparty with the shipping company and that, in doing so, it would act as an agent on behalf of the Exporters. The second, was that Forests would arrange for the carriage of the Exporters’ logs on vessels chartered by Shipping. There was no suggestion in the latter context that Shipping would be acting as an agent on behalf of the exporters. It was also made clear that Forests did not have authority to issue an LOI binding on the Exporters otherwise than in accordance with a specified procedure.
A Shipping Services Agreement between Forests and Shipping recorded that the Exporters had appointed Forests as their agent authorised to undertake the marketing, sale and export of logs on behalf of the Exporters and that Shipping was in the business of providing shipping services using chartered vessels and independent carriers.
Analysis and Conclusions
Given that as the court found the whole purpose of establishing Shipping was to insulate both Forests and the Exporters from the risks inherent in acting as the charterer of the carrying vessels this was considered by the court to be a highly material factor when considering whether there was the necessary consent on the part of the Exporters that Shipping should act a relevant agency capacity (Dinglis Management Ltd v Dinglis Properties Ltd [2019] EWCA Civ 127, paras 24 and 33 to 35) Richards LJ. If there had been an express agreement for an agency relationship, the fact that it defeated the underlying purpose would be nothing to the point. But this is a case in which the court is asked to place a legal analysis on the parties’ relationship by a process of inference from the facts).
While some of the language of the Shipping Services Agreement ( as in e.g. ‘for and on behalf of’) was consistent with agency, it was not inconsistent with any other relationship as both ‘for’ and ‘on behalf of’ may have the more general meaning of ‘for the benefit of’ (Rochdale Metropolitan Borough Council v Dixon [2011] EWCA Civ 1173, [2012] PTSR 1336, para 49 Rix LJ “If, however, I am wrong about this, and the concept of agency is inappropriately invoked in the analysis of these arrangements, there is also authority that the expression “on behalf of” does not necessarily require the concept of agency, but may have the more general meaning of “for the benefit of” or other such phrases. Indeed, Mr Westgate accepts that this is so and there is authority to that effect. Thus in Regina (S) v. Social Security Commissioner [2009] EWHC 2221 (Admin), [2010] PTSR 1785, Sir Thayne Forbes held that “on behalf of” in para 4(10) of schedule 3 to the Housing Benefit and Council Tax Benefit (Consequential Provisions) Regulations 2006 was to be given the meaning of “in its place” or “instead of” rather than “for the benefit of” or “in the interests of” or as expressive of agency .., and at para 28 wrote in seeming approval of the parties’ common ground conclusions, based on those authorities, to the effect that “the key principles to be derived from the various cases in which the words “on behalf of” have been considered are as follows: (i) the phrase “on behalf of” does not have a fixed meaning, it is not a term of art; (ii) the phrase is capable of bearing a wide range of meanings; and (iii) it will take its meaning in any particular case from its statutory context.”).
The Shipping Services Agreement had to be interpreted as a whole in the light of the background and purpose. It contained many references to agency, but these all related to the status of Forests as agent for the Exporters, with Forests being referred to throughout as ‘the Agent’. If it was intended that Shipping should act as agent for the Exporters, the failure to say so in terms was thought to be a surprising omission. As between the Exporters and Shipping, it was the Exporters who had an economic interest in the charterparties, in that they were required to reimburse Shipping for freight and demurrage, and took the benefit of dispatch and address commission, but the court said this did not necessarily point to Shipping having acted as the Exporters’ agent. It was at least equally consistent with an arrangement whereby Shipping would contract as a principal, but on the basis that it would be in effect indemnified by the Exporters.
As to the LOI’s themselves the court thought that the starting point here (that the Exporters had the better of the argument that Shipping had entered into the charterparties as a principal) was in itself a powerful reason to conclude that the LOIs were also issued by Shipping as a principal but in any event the agency argument also must also fail here too given that the terms of the agency agreements showed that Forests had no authority to issue an LOI binding on the Exporters other than in accordance with a specified procedure which was not followed here.