TT Talk - Legal eagle: know the shipper
This judgment sets out a useful analysis of contracts where a court will examine the conduct of the parties and surrounding circumstances to reach a conclusion. Carriers should be alerted to the importance of knowing who they are dealing with, ensuring that the shipper on a bill of lading is correctly identified.
MVV contracted with RockSolid BV to carry consignments of waste (unprocessed incinerator bottom ash) from its electricity production plant in Plymouth, England to RockSolid's plant in the Netherlands for treatment and disposal. Risk and title transferred to RockSolid from collection at MVV's plant.
RockSolid used its own vehicles to collect the product, chartered ships and issued bills of lading through its agents, Sanders Stevens Ltd, for each of 34 shipments over a period of 18 months. All the bills incorrectly named MVV as shipper. RockSolid approved the bills and Sanders Stevens emailed copies to MVV. Neither RockSolid nor MVV commented on the error.
The day after the 34th shipment was loaded on board a ship chartered by RockSolid from NTO two explosions occurred, injuring the chief engineer and damaging the ship.
The bill for the 34th shipment incorporated a charter party between RockSolid and NTO, and specifically referred to arbitration. NTO claimed losses in excess of €700,000 from MVV in London (LMAA) arbitration, relying on the contract of carriage as evidenced by the bill. MVV's pleaded that the bill had been prepared in error, and it was neither the shipper nor a party to the contract of carriage, and was therefore not subject to the arbitration agreement referred to in the bill. The tribunal rejected this pleading and took jurisdiction. MVV appealed by application to the High Court.
It was common ground that, if MVV was not bound by the contract of carriage as evidenced by the bill of lading, it was not party to the arbitration agreement. MVV clearly did not itself enter into the contract. The issue was whether either RockSolid or Sanders Stevens had express, implied or ostensible authority to enter into the contract as agents for MVV.
The court found no evidence that RockSolid or Sanders Stevens had any type of authority from MVV. There was nothing to indicate express authority, and implied authority required to be connected with previously granted express authority. Ostensible authority required words or conduct by a principal holding a party out as authorised to act as its agent, which the court did not find in this case.
NTO returned several times to the argument that MVV's silence concerning the error on the bills amounted to granting of authority for these purposes. But the court found that authority to enter into a contract on behalf of another is not 'lightly to be inferred', and silence without express agreement is not sufficient. There has to be more on which to 'hang the silence'. The argument was further weakened by the fact that, after the incident, RockSolid and Sanders Stevens agreed without complaint to MVV's request to cease showing MVV as shipper.
NTO's argument that MVV had 'clothed' Sanders Stevens with ostensible authority by instructing Sanders Stevens to email copies of the bills of lading to MVV on 34 occasions, thereby establishing a course of dealing, found no traction. NTO had had no knowledge of the first 33 emails, and had not been the carrier for the shipments to which they referred.
The court found that MVV had been incorrectly named as shipper on the bill of lading. A bill of course evidences a contract of carriage, which is invariably concluded before the bill is issued. The presumption that the bill correctly names the parties is a 'starting point'. But it can be rebutted by evidence of the true contractual relationships involved. There is nothing special about bills which exempts them from this analysis.
It followed that both MVV's contract with RockSolid and RockSolid's contract with NTO were principal to principal contracts and not contracts of agency. And there was no contract of any type between MVV and Sanders Stevens. RockSolid was therefore exclusively responsible for the carriage and MVV was not subject to the arbitration agreement. The tribunal's award was set aside.
This judgment relies quite extensively on precedent, but is nevertheless a useful reminder that, although authority to enter into an arbitration agreement need not be expressly documented, a court will examine the conduct of the parties and surrounding circumstances. Moreover, the willingness of the court to look behind incorrect identification of the shipper on a bill of lading may alert carriers to the importance of knowing who they are dealing with, especially if dangerous cargoes are involved.
Successful jurisdictional applications of this type from arbitration tribunals to the English High Court, so called 'Section 67 applications', are rare.
MVV ENVIRONMENT DEVONPORT LTD v NTO SHIPPING GmBH & CO KG (The NORTRADER)  EWHC 1371 (Comm)
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Risk Management Director, TT Club