Berge Bulk Shipping Pte Ltd v Taumata Plantations Limited
DMC/SandT/25/12
England
Berge Bulk Shipping Pte Ltd v Taumata Plantations Limited, Tiaki Plantations Company and OTPP New Zealand Forest Investments Limited (The “Cosmos Harmony”)
English Court of Appeal: Males, Falk and Zacaroli LJJ: [2025] EWCA Civ 876: 10 July 2025
Judgment Available on BAILII @ https://www.bailii.org/ew/cases/EWCA/Civ/2025/876.html
Steven Berry KC and Michael Hain (instructed by Holman Fenwick Willan LLP) for Berge Bulk Shipping (Owners)
David Bailey KC and James Goudkamp (instructed by Herbert Smith Freehills LLP) for Taumata Plantations and others (Exporters)
CARRIAGE OF GOODS BY SEA: DELIVERY OF CARGO WITHOUT PRODUCTION OF BILLS OF LADING, IN RETURN FOR LETTERS OF INDEMNITY (“LOIs”) SIGNED BY CHARTERERS: CLAIMS FOR MISDELIVERY OF CARGO MADE AGAINST OWNERS: OWNERS SEEK INDEMNITY FROM CHARERERS: CHARTERERS BECOME INSOLVENT: WHETHER EXPORTERS’ AGENT AND/OR EXPORTERS WERE UNDISCLOSED PRINCIPALS OF CHARTERERS UNDER LOIs
Summary
Owners of two vessels brought an appeal seeking to hold Exporters and Exporters’ Agent (Shippers of the log cargoes) liable under Letters of Indemnity (“LOIs”) issued by TPT Shipping Ltd (“Shipping” – Charterers under the Charterparties), for cargoes of logs delivered without production of the original bills of lading following claims brought by Amrose Singapore Pte Ltd (“Buyers”) for misdelivery. Owners argued that Shipping acted as Exporters’ and Exporters’ Agent’s undisclosed agent when entering into the Charterparties and, by extension, when issuing the LOIs.
In dismissing the appeal, the Court of Appeal found that there was no good arguable case that Shipping were Exporters undisclosed principal; therefore, Owners could not sue Exporters under the LOIs.
Case note contributed by Sheridan Steiger, LLM (International Trade and Commercial Law), LLB (Hons), BA (Hons), Solicitor of England & Wales, and International Contributor to DMC’s Case Notes
Background
The appeal was brought by Owners as disponent owners of the “Cosmos Harmony” and the “TS Index” on which cargoes of logs were shipped from New Zealand to India.
The logs were produced and shipped by three companies, referred to in the judgment as the “Exporters”. In turn, the Exporters entered into a Log Marketing and Sales Agency Agreement (“LMSAAs”) with TPT Forest Ltd (“Exporters’ Agent”), for the purpose of the latter acting as agent to promote and sell logs overseas.
In 2004 it was decided to re-structure arrangements to try to insulate the business from the risks of chartering vessels. This led to the incorporation of TPT Shipping Ltd (“Charterers”) in 2004.
A letter to Exporters set out the rationale for this step as:
[Shipping] operations will be kept separate to the operations of [Exporters’ Agent] to ensure that the risks inherent in chartering vessels are effectively “ring fenced”…
In late 2019, Charterers entered into two voyage charterparties (“Charterparties”) with Owners to carry the two separate cargoes of logs. The Charterparties were entered into before the cargoes of logs were sold to Amrose Singapore Pte Ltd (“Buyers”).
The Charterparties all provided that any dispute arising from or in connection with them was to be referred to arbitration in London and that English law would govern the dispute.
Bills of lading were issued for the cargoes by Owners. However, they were not available at the discharge port and Owners accepted LOIs in the conventional form providing for English governing law and English High Court jurisdiction.
Following the discharge of the two cargoes, Buyers’ financial backers arrested Owners’ vessels alleging that the cargoes had been misdelivered.
Owners initially commenced proceedings against Charterers and sought (and later obtained) a mandatory injunction requiring them to perform their obligations under the LOIs. However, Charterers subsequently called in administrators and later entered into a liquidation process.
In response to this, Owners then sought to bring claims against the Charterers, Exporters’ Agent and/or Exporters. It was Owners’ position that the Exporters and Exporters’ Agent were the undisclosed principals of Shipping and that, by extension, Exporters and Exporters’ Agent were also Shipping’s undisclosed principals under the LOIs.
At first instance, the High Court dismissed the claim, holding that there was no good arguable case that Exporters and Exporters’ Agent were an undisclosed principal to the Charterparties or the LOIs. The court also held that Shipping acted as the principal when entering into the Charterparties and the LOIs.
Owners appealed the decision made in favour of Exporters and Exporter’s Agent and sought to raise an estoppel argument that had not been addressed in the High Court.
The key issue before the Court of Appeal was whether Exporters were undisclosed principals to the LOIs.
Lord Justice Males delivered the unanimous judgment and set out the background to the doctrine of undisclosed principal referring to Lord Lloyd’s judgment in Siu Yin Kwan v Eastern Insurance Co Ltd (fn.1):
(1) An undisclosed principal may sue and be sued on a contract made by an agent on his behalf, acting within the scope of the agent’s 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 may show that the agent is the true and only principal.
Reference was also made to Mr Justice Leggatt’s comment that (fn.2):
“…the presumption must be that the named person is contracting as a principal. That presumption is capable of being displaced, but in order to displace it, convincing proof is needed that the named party was…contracting on behalf of an undisclosed principal.”
Lord Males clarified that the standard of proof needed is the ordinary civil standard of the balance of probability and Mr Justice Leggatt’s reference to ‘convincing proof’ did not impose some heightened standard.
Judgment
The Court of Appeal dismissed Owners’ appeal and affirmed the High Court decision.
Having considered the factual matrix around the Charterparties, Lord Males found that Shipping entered into the Charterparties as a principal and not on Exporters’ account. In support of this, reference was made to the fact that Shipping was incorporated for the purpose of insulating Exporters and Exporters’ Agent from the risks associated with chartering vessels.
Further, none of the various agreements entered into by Exporters’ Agent, Exporters and Shipping contained any reference to Shipping acting as agents for Exporters. This was viewed as a glaring omission in circumstances where the same agreements noted such a relationship existed as between Exporters and Exporters’ Agent.
Finally, other facts were viewed as indicative of the position. In particular, it was noted that the Charterparties were entered into before the cargoes had been sold. When the Charterparties were signed it was possible that the vessels would carry cargoes unconnected with Exporters. This meant that there was no clarity as to which (if any) of the Exporters were to be regarded as Shipping’s principal when the Charterparties were concluded.
Having satisfied themselves as to the position under the Charterparties, the Court of Appeal moved on to consider the LOIs.
Adopting the same reasoning, the Court of Appeal held that the LOIs were issued by Shipping as principal and not as agent for Exporters. Lord Justice Males noted that an agency relationship between Exporters and Shipping required objective evidence of consent having been given, but this was not established on the evidence by Owners.
Owners had also sought to rely on the fact that Shipping had sought Exporters’ Agent’s approval when issuing the LOIs as evidencing the existence of an agency relationship. However, the Court of Appeal agreed with the decision of the High Court: it reflected that once discharged and delivered, Exporters would lose their security for payment of the purchase price. Given that Exporters’ Agents were named as “Shippers” on the bills of lading, it made sense to seek their approval if delivery was to be made without presentation of the original bills of lading. The Court of Appeal also noted that Shipping had taken back to back LOIs from Buyers and, in the event that Shipping was exposed to any liability, they would naturally seek reimbursement from Buyers.
Owners also sought to introduce a new argument before the Court of Appeal.
They submitted that Exporters’ Agent had ostensible authority to authorise the issuance of the LOIs on behalf of the Exporters such that Exporters were estopped from denying Exporters’ Agent had authority.
Applying the principle that it is fatal to a new point being heard if there was a real possibility that evidence could have been adduced that may have affected the outcome, Lord Males refused to allow the point to be raised (fn.3).
However, the Court of Appeal went on to set out its thoughts in any event concluding that it was a “bad point” for the following three reasons:
(1) No evidence was provided to support an argument that Shipping relied on Exporters’ Agent holding out that it had authority to issue the LOIs on behalf of Exporters.
(2) The liability of an undisclosed principal only arises when the agent has actual authority to conclude a contract on behalf of the principal. It was the Court of Appeal’s decision that the doctrine of undisclosed principal should not be extended to a “kind of fictional authority, arising as a result of an estoppel”.
(3) A feature of the relationship between an undisclosed principal and a third party is that it is mutual. The requirement of mutuality would be circumvented if an estopped party were liable on the contract (given it would not be able to use the estoppel to sue on the same contract).
Comment
LOIs are commonly used in shipping (the judgment noted that 58% of voyages in a five-year period involved delivery against an LOI). However, under standard P&I Club cover, liabilities arising under such LOIs are excluded. For this reason, P&I Clubs regularly remind their members that an LOI is only as good as the creditworthiness of the party issuing it. This case serves as a reminder that owners may be left bearing 100% of a loss in the event that the issuer of the LOI later goes insolvent.
If, therefore, it is intended by owners to have the right to enforce an LOI against multiple parties (e.g. a more financially robust parent company), owners should ensure that the LOI is drafted and signed in such a way as to expressly bind the additional party to the agreement.
The case also highlights the challenges that any party seeking to rely on an undisclosed principal argument will face in the English courts.
Footnote 1: Sui Yin Kwan v Eastern Insurance [1994] AC 199 at 207
Footnote 2: The “Magellan Spirit” [2017] 1 All ER (Comm) 24 at 28
Footnote 3: The “Dijilah” [2024] EWCA Civ 580, [2025] 1 All ER (Comm) 97 paras 23-31
