Golden Ocean Group Ltd. v Salgaocar Mining Industries PVT Ltd & Anor

These are applications by the defendants – Salgaocar Mining Industries PVT Ltd (“SMI”) and Mr Anil V. Salgaocar (“Mr Salgaocar”) - to set aside an order made by me on 11^th March 2010 giving the claimant – Golden Ocean Group Limited (“Golden Ocean”) – permission to issue a claim form for service, and to serve it, on the defendants in Goa.

Golden Ocean claims (i) that Trustworth Shipping Pte Ltd (“Trustworth”) repudiated a 10 year charterparty dated 2^nd February 2008: (ii) that Trustworth had been nominated by SMI as charterers; and (iii) that that the charter was guaranteed by SMI. Golden Ocean claims to have suffered losses of around US $ 54 million by reason of that repudiation and claims that sum against SMI under the guarantee. SMI and Trustworth say that Mr Salgaocar did not have authority to bind them to any contract either of charter or of guarantee, and it is on that account that Mr Salgaocar is sued for breach of warranty of authority to enter into both contracts on behalf of SMI and Trustworth.

Until very shortly before the hearing of the application the defendants claimed that there was no serious issue to be tried that Mr Salgaocar had authority, whether actual or ostensible, to contract on behalf of SMI. However, in late October, following disclosure ordered by Walker J of a number of previous fixtures, the defendants (first Mr Salgaocar, and then SMI) indicated that they would not be making that claim on the present application. There is, accordingly, and as I find, an arguable case that he did have such authority. I am also satisfied that there is, as the defendants also accept, an arguable case that he had authority to act on behalf of Trustworth. I shall, therefore, proceed, for the purposes of this judgment upon the assumption (without deciding) that Mr Salgaocar had authority to act on behalf of those two companies.

SMI is a private family company. As at February 2008 Mr Salgaocar’s shareholdings gave him ultimate control of about 82.5% of its shares. Members of his immediate family held a further 6.5% of the shares directly. Under the Articles of Association Mr Salgaocar had power to appoint and remove one third of the Board of Directors. Throughout 2008 SMI’s website described SMI as a leading conglomerate of industries led by Mr Salgaocar. It featured a formal photograph of Mr Salgaocar with his two sons, Sameer and Arjun Salgaocar, who were described as directors of the company. Under the photograph were the words “Anil V. Salgaocar Chairman & Managing Director, Salgaocar Mining Industries Pvt. Ltd (Center)”. Mr Salgaocar had, according to Mr Gautam Radia, his son-in law who is an authorised signatory of SMI, “...guided the fortunes of SMI for approximately 30 years...”

In fact Mr Salgaocar resigned as a director of SMI on 31^st March 2006. Thereafter his two sons appear to have been the only directors even though Article 113 (b) of SMI’s Articles of Association requires there to be a multiple of 3 directors.

The website described SMI as being in the business of mining and exporting iron ore worldwide. Mr Salgaocar and SMI had extensive dealings with shipbrokers, Howe Robinson & Co Ltd (“Howe Robinson”). The main contact at Howe Robinson was Mr Guy Hindley (“Mr Hindley”) who was based in London. Mr Hindley generally acted on the oral instructions of Mr Salgaocar which Mr Hindley confirmed by email to him.

On 3^rd January 2008 Mr Hindley e-mailed Mr Salgaocar to tell him of the availability, from the 4^th quarter of 2009, of a number of new buildings for purchase from the Jinhaiwan yard, including 176,000 dwt Capesize bulkers. In the event negotiations began in early January 2008 between Golden Ocean and SMI for a 10 year charter of a Capesize new building expected to be delivered in October 2009.

Golden Ocean were the Owners of the subject vessel. The individuals concerned on their behalf were Mr Anders Zorn, Mr Jens Martin Jensen and Mr Jon Flaaten. Howe Robinson were their brokers as well. The individuals at Howe Robinson who acted for Golden Ocean were Mr Bernd Hintz and Mr Daniel Hall.

On 8^th January 2008 Golden Ocean offered to charter to SMI or an account to be guaranteed by SMI (Footnote: ¹ ) , a vessel described as “Golden Ocean Newbuilding Capesize Bulk Carrier Newbuilding ex Jinhaiwan, China”, at $ 42,500 daily for 10 year 2 months more or less at charterers’ option with an option to purchase at the end of the charter period at US$ 93 million. SMI countered at $ 40,000 per day and $ 85 million for the purchase price “a/c Trustworth Pte Limited Singapore fully guaranteed by Salgaocar Mining Industries Goa”. That offer was “- subject all further terms + details - subject owners board approval - subject charts reconfirmation to be lifted latest 5 working days after owners board approval lifted”.

The disclosure ordered by Walker J herein has revealed that since 2005 Howe Robinson has fixed around 125 vessels on Mr Salgaocar’s instructions with Trustworth as charterers. In 43 of those fixtures Trustworth was guaranteed by SMI. Four of those fixtures post dated the fixture in issue in the present case. Of those 43 fixtures 36 involved guarantees in the same form as in the present case namely by a single line in the charterparty. In January and February 2008 Howe Robinson concluded 15 other fixtures on Mr Salgaocar’s instructions, three of which were guaranteed by SMI.

Trustworth is a Singaporean company which, Golden Ocean claims, was used for tax reasons and because Indian foreign exchange regulations make it difficult to remit foreign currency abroad. The evidence indicates that it was, in effect, the chartering arm of SMI. Its use appears to have been in order to distance the charter from India.

The negotiations proceeded on the basis of the charterers being “Trustworth fully guaranteed by SMI”. They were conducted by e-mail, by which Messrs Hintz and Hall of Howe Robinson communicated with Messrs Zorn, Flaaten and Jensen of Golden Ocean; Mr Hindley of Howe Robinson communicated with Mr Salgaocar, and the Howe Robinson brokers communicated with each other.

On 10^th January 2008 Mr Hindley e-mailed Mr Salgaocar to tell him that he had managed to get Owners to confirm the last offer he had made so “we are agreed on everything except subjects”. Mr Hintz e-mailed to Mr Zorn of Golden Ocean to the same effect the next day.

At 17.56 on 11^th January 2008 Mr Hindley e-mailed to Mr Salgaocar, and at 19.40 Mr Hintz e-mailed to Mr Zorn recaps of the fixture in the same terms which included “- subject all further terms Owners nype/moa - subject Owners board approval to be lifted latest 1700 hours London on Monday 14 ^th January 2008 - subject to Charterers approval to be lifted latest 1700 hours on Tuesday 15 ^th January 2008”. The recap was, as before, “A/c Trustworth Pte Limited Singapore fully guaranteed by Salgaocar Mining Industries Goa”. These recaps followed agreement on the charterparty terms in e-mails passing between Mr Hintz and Mr Hindley.

The “approval” subjects were lifted on 14^th and 15^th January, leaving for negotiation the details of the NYPE charter and of the MOA for the purchase, if the option was exercised.

On 2^nd February Mr Flaaten of Golden Ocean replied to an e-mail of Mr Hintz setting out charterers’ proposal on the last outstanding points: “Agreed to the below and therefore fully fixed”.

On 4^th February Mr Hindley e-mailed to Mr Salgaocar “Pleased to confirm we have fixed subject to agreeing mutually acceptable terms on the MOA as follows...” and then set out a recap including the agreed charterparty terms. Mr Hintz e-mailed in the same terms to Mr Flaaten. The recaps were dated 2^nd February 2008.

On 21^st February at 12.30 am Mr Hall e-mailed to Mr Jensen of Golden Ocean the charterers’ proposed MOA terms. These included the following additional clause:

“Throughout this Charter Charterers are to be given access to all Drydock, damage, Port State Control reports and Charterers authorised representatives are to be granted access to visit vessel whether in the yard, drydock or in port”

At 09.00 Mr Jensen e-mailed to Mr Hall “All ok – except re deposit-say 5 days” (a reference to the time for provision of the deposit after declaration of the purchase option) and suggested that the additional clause suggested by the charterers belonged in the charterparty.

Mr Hall forwarded that 09.00 e-mail to Mr Hindley in the following terms:

“Following back from Golden Ocean on the MOA

In the end I did not mention anything about pulling the tail shaft to them, as on reviewing the VLCC we did with them it was in there …anyway they agree to all Salgaocar’s changes except deposit which I think quite right – do you know if it is already drawn up. If not suggest we put it in or otherwise do an addendum. Deposit seems very fair especially considering Salgaocar has the option on when to exercise.

Can I confirm this?”

That e-mail crossed the line between Mr Hall as broker for Golden Ocean and Mr Hindley as broker for SMI/Mr Salgaocar.

To that e-mail Mr Hall received a reply from Mr Hindley:

“YES. CONFIRM THE 5 DAYS THAT’S FINE.

CD U SEND ME RECAP – WITH TODAYS DATE?

SUGGEST TO GOLDEN OCEAN WE AGREE THE SAME DATE FOR C/P

CAN YOU GET ADDITIONAL CLAUSE PUT IN C/P AS DON’T THINK SAME HAS BEEN DRAWN UP YET THOUGH HAPPY FOR IT TO BE AN ADDENDUM

I’M RATHER HOPING WE CAN AGREE THAT VESSEL IS GOLDEN BEIJING AS SALGAOCAR LIKED THE NAME!

THANKS V. MUCH”

Mr Hall then e-mailed Mr Jensen in response (on the e-mail thread) to his 09.00 e-mail (see para 19 above):

“Many thanks yours - we are all done!

Charterers confirm ok to change deposit to within 5 days. Also will put the inspection clause in the C/P (or as an addendum).

Can we make the C/P and MOA today’s date? (Or have you already announced this deal?)

Also can we tell/confirm to Salgaocar that the Vessel will be the M.V. Golden Beijing?”

On 21^st February 2008 Mr Hall e-mailed to Golden Ocean a recap of the MOA.

At some date after 17^th July 2008 Howe Robinson drew up a charterparty between Golden Ocean and “TRUSTWORTH SHIPPING PTE LIMITED .Charterers of SINGAPORE fully guaranteed by SALGAOCAR MINING INDUSTRIES,GOA”. The pages of the amended NYPE form (but not the attached riders) have Howe Robinson’s stamp on them. At the end of the NYPE form appears the following:

“Owners Charterers

For the Owners

GOLDEN OCEAN GROUP LIMITED, BERMUDA

By e-mail authority received from

GOLDEN OCEAN MANAGEMENT AS

Dated 17 ^th July 2008

For and on behalf of

HOWE ROBINSON SHIPBROKERS, LONDON

Director

As Broker Only.”

There is no reference to the guarantee or the guarantors in the e-mail correspondence and the working copy of the charter other than in the description of the Charterers. The copy of the charter referred to in para 24 was never signed.

On 16^th September 2009 Mr Salgaocar’s secretary e-mailed to Mr Hindley a note from Mr Salgaocar in which he asked Mr Hindley to specify to Owners that the quantity of bunkers required on delivery should be sufficient for the vessel to arrive in Hong Kong where further bunkering would take place up to Singapore and thereafter at Singapore for a voyage Singapore – Goa – Singapore. He asked Owners to calculate the bunkers required and for them to arrange to paint “SALGAOCAR” on both sides of the hull and to mark “S” on the funnel in accordance with a logo which was enclosed.

On 30^th September Golden Ocean declared to Charterers that the vessel named “Golden Future” would be delivered to Charterers pursuant to the 2^nd February 2008 charter and that she would be delivered on/about mid November, say 17 November. Mr Hindley passed this declaration on to Mr Salgaocar together with notification that Owners had agreed to the painting requests at Charterers’ cost and that Owners had asked technical staff about bunkers to Goa.

On 28^th October 2009 Mr Hintz passed on a message he had received from Mr Hindley that “with changes in the group etc .. the one thing they do not rpt do not want is any Salgaocar markings on the vessel” and that Golden Ocean should go ahead and put their own markings on the hull and funnel.

On 4^th December Owners gave Charterers 30 days approximate notice of delivery of the “Golden Future” for 5^th January 2010. On 15^th December Owners gave 20 days approximate notice of delivery for that date.

On 8^th December 2009 Mr Rohit Mathrani, a director of Trustworth wrote to Mr Hindley stating “once again” that there was no guarantee made available by SMI and that Trustworth was unable to proceed further with the Charter Party.

On 16^th December 2009 Mr Mathrani e-mailed to Mr Kerr-Dineen, the joint chairman of Howe Robinson to say that there was “no Charter Party between [Trustworth] and [Golden Ocean]”. Mr Hintz forwarded that e-mail to Mr Zorn that day and expressed “our total surprise at the denial of the existence of a charterparty”. Mr Hintz referred to the large number of fixtures which Howe Robinson had concluded for Trustworth and another company linked to SMI, saying that “our authority for fixing all these ships (numbering in total close to some 250 fixtures) came directly and solely from Mr A V Salgaocar and the negotiation and handling of the present fixture was handled in the same manner”. He referred to a number of changes in the Salgaocar group, the division of Mr Salgaocar’s time between his business and his duties as a member of the Goan assembly and to his declining health, and to the fact that control of the business appeared to be being passed to his family and in particular his two sons, daughter and son-in-law. He also set out a message that had been sent by Mr Kerr-Dineen to Mr Mathrani which included the statement that:

“this charter was concluded on behalf of trustworth in accordance with authority we received from mr Salgaocar. Mr Salgaocar also confirmed that the charter was fully guaranteed by Salgaocar Mining Industries, GOA. This is the basis on which the vessel was fixed.”

Trustworth reiterated its denial of a charter and a guarantee in an e-mail of 23^rd December 2009 to Ince & Co, in response to a letter from Ince to SMI of 22^nd December asserting the existence of both. On 24^th December 2009 Ince & Co wrote to Trustworth treating its conduct as a renunciatory breach of the charterparty which Golden Ocean accepted.

On 23^rd December Golden Ocean had threatened to issue a press release stating that Trustworth had failed to honour its obligations under the charter and had stated without justification that there was no contract or guarantee; and that Golden Ocean would pursue a claim for damages and arrest Trustworth and SMI assets if Trustworth did not confirm by midnight that it would take the vessel. This produced a response from SMI dated 24^th December warning Golden Ocean against issuing the press release and reiterating that it had entered into no contract of guarantee with Golden Ocean nor authorised anyone to provide such a guarantee on their behalf.

The charterparty contains a London arbitration clause. Golden Ocean commenced an arbitration against Trustworth and SMI on 30 December 2009. On 2^nd January 2010 SMI sent a letter objecting that it was not a party to the arbitration agreement contained in the charterparty. Golden Ocean now accepts that to be so and has not continued arbitration proceedings against SMI. Trustworth, however, denies the existence of any arbitration agreement on the basis that it denies that a binding charterparty was ever concluded. It has appointed an arbitrator without prejudice to its contention that there is no contract between Golden Ocean and itself. Golden Ocean has applied under s 32 of the Arbitration Act 1996 for the court to determine the tribunal’s jurisdiction. The hearing has been fixed for April next year.

On 6^th February 2010, SMI filed a claim in India before the Court of the Civil Judge, Senior Division at Panaji, Goa, against Golden Ocean, Trustworth, and Howe Robinson. In that suit SMI seeks (i) a declaration that there is no contract of guarantee between Golden Ocean and SMI, (ii) injunctive relief restraining Golden Ocean from taking any steps to enforce the Guarantee, and (iii) approximately US$32.5 million in damages for defamation relating to the press release. On the same day the Indian court issued a temporary injunction restraining Golden Ocean from pursuing proceedings against SMI in arbitration. The injunction did not extend to court proceedings.

On 5^th March 2010 Golden Ocean commenced the present action by filing the Claim Form, Particulars of Claim and Application for permission to serve out. On 11^th March 2010 I gave permission to serve both defendants out of the jurisdiction.

The claim against SMI is a claim under the guarantee in respect of Trustworth’s repudiation. The claim against Mr Salgaocar is an alternative claim in respect of his warranty that he had the authority to bind Trustworth and SMI.

On 13^th April 2010 SMI applied to the Panaji court for ex parte orders against Golden Ocean and its managing director, Mr Herman Billung, for contempt by reason of the commencement of the English proceedings and was granted a further temporary anti-suit injunction restraining these proceedings in England. But that order was set aside by the High Court of Bombay at Goa on 7^th May 2010 on procedural grounds.

On 12^th May 2010 SMI applied to amend its plaint to seek permanent and temporary anti-suit injunctions restraining the present action in England. The application for an interim anti-suit injunction was rejected by the Panaji court on 18^th May 2010. Golden Ocean has applied to reject SMI’s plaint and has been advised by its Indian lawyers that its application has good prospects of success. The hearing of both Golden Ocean’s application and SMI’s application to amend has been adjourned on numerous occasions and remains pending in India.

On 25^th June 2010, SMI issued its application in this action challenging English jurisdiction and on 28^th June 2010 Mr Salgaocar issued his application in this action to the same effect.

Permission to serve out was sought and given on the basis that:

It is not, as I understand it, in dispute that the guarantee is arguably governed by English law, as a result of the choice of law in the charterparty (see further, para 147 below). SMI also accepts that Golden Ocean has at least a reasonable prospect of succeeding in its case that a binding charterparty was concluded with Trustworth, and that Mr Salgaocar had authority to bind Trustworth. SMI and Salgaocar also accept that there is an arguable case that Mr Salgaocar had authority to bind SMI to a guarantee.

SMI contends that there is no ‘serious issue to be tried’ because Golden Ocean cannot demonstrate that its claim against SMI has a reasonable prospect of success because the guarantee is unenforceable pursuant to the Statute of Frauds 1677.

Mr Salgaocar contends that:

In addition, both SMI and Mr Salgaocar argue that it would be more appropriate and just for the claim to be tried in Goa rather than in England.

It is also submitted that when the court’s permission to serve out was obtained Golden Ocean failed to disclose material circumstances; but Mr Dominic Kendrick, QC for SMI, realistically accepted that, even if this was so, the point was unlikely to benefit the defendants, against whom, even if the original permission was set aside, permission could be re-sought on the same grounds.

Section 4 of the Statute of Frauds 1677 (“the Statute”) (Footnote: ² ) provides:

“No action shall be brought whereby to charge the Defendant upon any special promise to answer for the debt default or miscarriage of another person unless the Agreement upon which such Action shall be brought or some Memorandum or Note thereof shall be in Writing and signed by the party to be charged therewith or some other person thereunto by him lawfully authorised .”

Despite its antiquity this section is still in force and the parties have made extensive submissions on its meaning. The focus of the written submissions and (initially) of the oral argument was on whether there was anything which could be regarded as a “Memorandum or Note” of the agreement. It appeared to me, however, that the matter could and should be looked at differently.

The sequence of events which I have described in paras 9 - 23 above is not uncommon. Negotiations are entered into for a long term charter between Owner O and potential Charterer C. O is not content only to have C’s promise, and so the negotiations proceed on the basis that C’s obligations will be guaranteed by G. The guarantee is set out in the draft charter by stipulating as charterer “C as fully guaranteed by G”. If an agreement is eventually made in those terms by someone who is duly authorised by C and G then, subject to any question as to the effect of the Statute, O has all the protection he needs – in the form of a full guarantee by G. It is not necessary for the guarantee to be in a separate document or in any ampler terms.

Negotiations continue by e-mail as to the basic terms of the charter (e.g. description of vessel, commencement and end of the term, hire, and form of charterparty) and, if there is to be one, of any option to purchase (e.g. time for exercise of the option, amount of deposit and purchase price). Agreement is reached subject to various conditions (e.g. board or other approval, and detailed terms of the charterparty and memorandum of agreement), which are satisfied at various steps along the way. The “subjects” are progressively lifted as further agreement is reached. The negotiations proceed by a sequence of offers which are accepted in part but with counter proposals, often in the form “Accept/except”, followed by a list of the terms proposed in respect of the items which have not been accepted or of new proposed terms.

The effect of any counter proposal is that the previous offer lapses and is no longer available for acceptance. But there comes a time, at the end of the process, when the last counter offer on the last term(s) remaining unagreed is accepted and the contract is complete. The charterparty will then have become contractually agreed. The guarantee does not become contractual until then, even though its intended form (“fully guaranteed by G”) has remained constant throughout, because, until the charterparty terms are agreed, the obligations which are to be “fully guaranteed” are inchoate and yet to be determined. But, once they are agreed, the guarantee is complete.

Mr Kendrick accepts that an agreement can be made in that way, and that such an agreement could satisfy the Statute. But, he submits, that is not so in this case. That is, as I understood him, for three reasons:

As to (a), I do not accept that, if the parties agree by e-mail the basic terms of a charterparty including a guarantee, and then the detailed terms of the charterparty, so that the concluding e-mails in the sequence of negotiations no longer make express reference to the guarantee, their final agreement is not, qua the guarantee, an agreement in writing for the purpose of the Statute. If, as is accepted in the present case, there was arguably an agreement to charter and to guarantee, it was an agreement reached in writing. There is no suggestion that there was any term either of the guarantee or of the charterparty which was only agreed orally. I do not see why what, for all other purposes, is an agreement in writing, is not an agreement in writing for the purposes of the Statute.

As to (b), it does not seem to me that the request for a recap means that there was no agreement in writing. The recap was a recapitulation of an agreement that had (arguably) already been made – in writing.

As to (c), Mr Kendrick accepted that if there is a series of correspondence about (a) the charterparty; (b) the guarantee; and (c) the memorandum of agreement as to the option to purchase; culminating in “Owners accept your last”, it would be legitimate to look at the sequence of correspondence. But in the present case the last document (the “Yes Confirm ...” e-mail), looks forward, he submits, to a recap, and contemplates an additional clause in the charter and seeks to know what the position is in relation to the name “Golden Beijing”. Even though, looking backwards from the last communication, there might arguably be a contract, the Statute requires a clear memorandum in, as Mr Kendrick put it, “a confined number” or “a very confined number” of documents.

I do not accept this. The e-mail beginning “Yes confirm the 5 days that’s fine” is the culmination of a sequence of negotiations. Even if it stood alone it would, as it seems to me, necessarily refer back to the sequence of communications of which it was the last. As it is the e-mail appears in the same document as contains the messages at paragraphs 18- 20 above, which themselves relate back to the negotiations of which they were a concluding part. Anyone reading them would realise that there was a sequence of charterparty negotiation, including an option to purchase on the terms of a memorandum of agreement, and that any contract made had to be discerned by going back through the preceding e-mails, as far as was necessary, to determine what the agreement was as to the charterparty (including guarantee), and MOA.

I do not accept that, if an agreement has been made in writing, there is some limit to the number of documents to which reference is permissible. If there is said to have been an agreement in writing the Court is entitled to look at those documents which are said to constitute the agreement, however many they may be. In contracts made in the manner in which the present contracts are said to have been made, that involves looking at more than two documents (one of offer and one of acceptance), both because the terms of the charterparty and of the memorandum of agreement were negotiated sequentially and because, in negotiations of the “Accept/except” type the last offer, which may only except one small item (such as whether a sum should be paid in 7 as opposed to 5 days), will not be intelligible without reference to the preceding offers and counteroffers.

Mr Kendrick submitted that this was inconsistent with the line of authority quoted in Elias v George Sahely [1983] A.C. 646 and summarised by Jenkins LJ in Timmins v Moreland Street Property Co Ltd [1958] Ch 110 when he said:

“it is still indispensably necessary, in order to justify the reading of documents together for this purpose, that there should be a document signed by the party to be charged, which, while not containing in itself all the necessary ingredients of the required memorandum, does contain some reference, express or implied, to some other document or transaction. Where any such reference can be spelt out of a document so signed, then parol evidence may be given to identify the other document referred to, or, as the case may be, to explain the other transaction, and to identify any document relating to it. If by this process a document is brought to light which contains in writing all the terms of the bargain so far as not contained in the document signed by the party to be charged, then the two documents can be read together…”

Those observations were made in relation to a memorandum of an agreement and not to an agreement made in writing and, in my judgment, are not strictly applicable.

In any event the last e-mails in the chain of e-mails in the present case referred impliedly to those that had gone before in the sequence of negotiation which led to the contract. I reject Mr Kendrick’s submission that the court is confined to looking at a “very confined number” of prior documents. I note that in The Anemone [1987] 1 Lloyd’s Rep 546 Staughton J regarded the Statute as satisfied by three telexes the last of which contained by its reference to the penultimate telex an implied recognition that the defendant had contracted to guarantee the charterparty terms; the penultimate telex referred to a letter of guarantee which could be taken as a reference to the first telex which set out the wording of the guarantee. There is no suggestion of a limit on the number of documents that can be referred to.

These conclusions seem to me consistent with the policy behind the Statute and commercial good sense.

As to the former, the Statute is concerned to see that guarantees cannot be enforced if they are not either embodied in an agreement made in writing or are ones in respect of which a written note or memorandum exists signed by the person said to be liable. If on a proper analysis of the documents passing between the parties there is an agreement, the policy behind the Statute is in no way frustrated: see In re Hoyle [1893] 1 Ch 84:

“The object of the Statute was to prevent fraud and perjury by taking away the right to sue on certain agreements if only established by verbal evidence ... The object of the statute being merely to exclude parol evidence, any writing embodying the terms of the agreement and signed by the person to be charged is sufficient...” (Footnote: ³ )

“... the court is not in quest of the intention of the parties, but only of evidence under the hand of one of the parties to the contract that he has entered into it....” (Footnote: ⁴ )

“The question is not what is the intention of the person signing the memorandum, but is one of fact, viz., is there a note or memorandum of the promise signed by the party to be charged?” (Footnote: ⁵ )

As to commercial good sense, it seems to me highly desirable that the law should give effect to agreements made by a series of e-mail communications which follow, more clearly than many negotiations between men of business, the sequence of offer, counter offer, and final acceptance, by which, classically, the law determines whether a contract has been made. This is particularly so when charterparties with guarantees are often negotiated and concluded by the sort of e-mail exchange seen in this case; and are not necessarily followed by a drawn-up charter.

It is not necessary to decide this matter finally. I am, however, entirely satisfied that it is well arguable that the Statute of Frauds has been satisfied because the agreement upon which Golden Ocean bases its claim was an agreement in writing (Footnote: ⁶ ) . In the end Mr Kendrick accepted that there was an arguable contract constituted entirely by documents.

There is therefore, a serious issue to be tried as between Golden Ocean and SMI. There is also a serious issue to be tried against Mr Salgaocar for breach of warranty of authority (if, as SMI contends, he lacked authority to bind it). He cannot contend that it is unarguably the case that, even if he had had authority, there could have been no recovery against SMI since the contract of guarantee was neither in writing nor was there a note or memorandum of it in writing.

In the light of those conclusions it is perhaps otiose to address the considerable number of authorities to which I have been referred. I do so in deference to the extensive submissions of counsel, and in order to consider whether the approach which I have adopted in the previous paragraphs is contra-indicated by any of them, and also to address the submissions originally made as to what constituted the relevant memorandum or note.

In Actionstrength Ltd v International Glass Engineering IN.GL.EN SpA and another [2003] 2 AC 541 the House of Lords found that what had been said amounted to an oral guarantee. The House made clear that, so far as guarantees are concerned, the section remained in full force and vigour and that its provisions were not to be emasculated by the estoppel on which the claimant sought to rely; but that they might be sidestepped by an express oral assurance not to plead the Statute. Lord Hoffman pointed out that the purpose of the Statute was to avoid the need to decide which side was telling the truth about whether or not an oral promise had been made and exactly what had been promised. The case was not concerned with a written agreement.

In Carlton Communications v The Football League [2002] EWHC 1650 (Comm) Langley J had to consider, inter alia, the impact of the Statute in relation to an alleged guarantee by the claimants, who were indirect shareholders in ONdigital (sic), in favour of the Football League. The guarantee was said to be contained in an “Initial Bid” (which was followed by a “Revised Bid” and a later “June contract” – being an amendment of a draft previously produced by ONdigital) in which there appeared the words:

“ONdigital and its shareholders will guarantee all funding to the FL outlined in this document”

Langley J recorded the putative guarantor’s submissions (all of which he thought to be correct) that the League’s case fell foul of the Statute because:

Langley J referred to Tiverton Ltd v Wearwell Ltd [1975] Ch 146. In that case the Court of Appeal decided that Law v Jones [1974] Ch 112, which decided that a “subject to contract” document might satisfy section 40 of the Law of Property Act 1925 if the stipulation had later been waived, was wrong (Footnote: ⁷ ) ; and that that case could not be used to make a subject to contract letter written after an oral contract a sufficient memorandum. Tiverton also decided that the requisite document must contain a statement of the material terms of the contract. It also re-affirmed a line of cases (described by Lord Denning as bold but very necessary to meet the justice of the case) that an offer in writing, which was accepted orally or by conduct, could be enforced against the offeror, notwithstanding the Statute.

Langley J concluded that Tiverton compelled him to hold that a “subject to contract” document was not sufficient as a note or memorandum and that the requisite document must contain a statement of the material terms of the contract of guarantee. That ruled out the Initial and Revised Bids. The June Contract contained no reference to any guarantee and the Financial Arrangement statement in the Initial Bid, in which there was a reference to a guarantee, was limited by its terms to the “funding” stated in it which was markedly less than that contained in the June Contract. Nor was there any document on which the League could rely which was, or purported to be, signed by the alleged guarantors or any person lawfully authorised by either of them.

None of the considerations which applied in that case means that Golden Ocean falls foul of the Statute in this one. Langley J was dealing with a distinctly unpromising contention that the reference to a guarantee in the Initial Bid, itself subject to contract, could be regarded as a guarantee of obligations entered into in the June Contract which referred to a much larger amount and made no reference to any guarantee. In the present case the guarantee wording, although embodying a separate contract, remained a constant part of the charterparty terms under negotiation such that the guarantee is readily applicable to those terms (of which it formed part) in their final form.

Mr Kendrick submitted that the Statute applies in a somewhat different way according to whether the guarantor or his agent signs.

Where the guarantor signs the Statute gives two options:

I do not entirely accept this latter submission for the following reasons.

The Statute requires the note to be a note of the agreement upon which the action is “brought whereby to charge the Defendant upon any special promise to answer for the debt default or miscarriage of another”; and not just a note or memorandum of a proposal: Evans v Hoare [1892] 1 QB 593.

However, the Statute does not require that the memorandum must always postdate “the main contract” i.e. the contract whose obligations are guaranteed or be contemporaneous with it. Thus, a contract of guarantee may exist before the debts guaranteed by it arise, as where A agrees with B for good consideration, or by deed, to guarantee all the future debts of C to B.

Mr Kendrick further submits that any note or memorandum must contain all the material terms of the guarantee and recognise the terms of a concluded contract. If by that is meant that it must be plain from the note what is the contract which the guarantee is guaranteeing, I agree. But I do not accept that the guarantee is required to set out in writing all the material terms of the contract guaranteed or refer to a document that does. The Statute requires the special promise to answer for the debt, default or miscarriage of another to be made or noted in writing, not that the debt guaranteed should either be incurred under a contract in writing or of which a written note or memorandum exists. I do not see why an agreement in writing by X that, in consideration of an agreement to extend further credit to Y up to a certain sum, Z will answer for all the debts of Y, past and future, or a memorandum or note thereof, offends the statute even if the past debts have been incurred pursuant to oral contracts, whose terms are not set out in the guarantee, and the future debts cannot be specified because they have not yet been incurred: see Westhead v Sproson [1861] 6 H & N 728 (Footnote: ⁸ ) .

These points have potential significance in the present case insofar as Golden Ocean sought to rely, as it did, on the oft repeated references in the e-mail exchanges to “TRUSTWORTH ... fully guaranteed by [SMI]”. I do not accept that any of those references constituted a sufficient note or memorandum prior to the time when the contracts of charter and guarantee were arguably made – on 21^st February 2008. Until then there was no agreement of guarantee of which to make a record and it was not known what exactly SMI was guaranteeing. A binding agreement can no doubt be made to guarantee whatever charter is subsequently agreed in which case the contract of guarantee will precede the charter. But in the present case the charter and the guarantee were inextricably linked since (a) the guarantee was constituted by the specification of SMI as guarantor following the description of the charterer; (b) it was a guarantee of the charter, as finally agreed; and (c) the entry into the charter by Golden Ocean formed the consideration for the guarantee.

The Act says nothing about the capacity in which the guarantor signs; nor does it require that the note or memorandum be given to the beneficiary of the guarantee. Anything signed by the guarantor at any time and for whatever purpose will do. He may, for instance, have made a note in his personal diary – one of the examples given by A.L. Smith LJ., in In Re Hoyle [1893] 1 Ch 84 – or in his will: In re Hoyle.

In this connection Mr Kendrick referred me to “The Maria D” [1992] 1 AC 21. There the brokers (Marti) were to guarantee a charter on the Gencon form, which contained, as one of the additional typed clauses a provision (Clause 24) in the following terms:

“Demurrage guaranteed and payable directly by charterers to owners. However Marti guarantees about outstanding demurrage, if any, and for balance freight”

The brokers stamped and signed the front page “For and on behalf of charterers as brokers only”. The intervening pages were, so far as the brokers were concerned, simply stamped with the brokers’ stamp without any indication of capacity. The last page (which was the last page of the typed additional clauses 18-55) bore the brokers stamp and a signature below the words “Charterers”.

In that case there had been an oral contract, made in the course of telephone conversations, by which Marti guaranteed the liabilities of the charterers in respect of demurrage and the balance of the freight. Lord Brandon indicated that there were two possibilities:

Nothing in that case detracts from the analysis made in this judgment. The present case is not said to involve a prior oral guarantee and there is, arguably, a written agreement signed on behalf of the party to be charged.

Mr Kendrick submitted that, where the signature is given by the agent, it must still be a note made after the main contract and must contain all the terms of the guarantee. But it is not sufficient that the signature was given in any capacity. The Statute requires the agent to be “lawfully authorised” and that requires him to be lawfully authorised by the guarantor either to sign the agreement (if that is what he does) or to sign the note as a note of the agreement, in each case on the guarantor’s behalf. If what is signed is a note, it is not necessary that the agent who signs the note on behalf of the guarantor is the agent who agreed the oral contract on his behalf.

In Smith v Webster [1876] 3 Ch D 49 P verbally agreed to buy an inn from D. On the next day D told his solicitors that he had entered into a verbal arrangement for the sale and instructed them to prepare an agreement. On the same day they forwarded a draft formal contract to P’s solicitors under cover of a letter which said:

“[D] has been with us today, and stated that he had arranged with your client [P] for sale to the latter of the Golden Lion for £ 950. We therefore send herewith draft contract for your perusal and approval.”

This was held by the Court of Appeal to be insufficient as a note or memorandum. James LJ held that the only authority given to the solicitor was to prepare a formal document. Even if the letter had said that D had “told us that he has sold the property to you for £ 950” this would merely have been the communication of a fact. The signature would not make it a binding memorandum, not being affixed eo intuitu. The draft sent was not the same contract as had been agreed and a statement of the reason why it was being sent was not a memorandum signed by someone authorised by the person interested to sign it as binding. Bagallay LJ regarded the agreement reached as conditional upon a formal contract and said that the authority conferred on the solicitor by D was not authority to convert it into an absolute agreement. Lush LJ held that in order to satisfy the statute a note or memorandum must be one which the principal had authorised the agent to sign as a record of the transaction and that the authority actually given to the solicitors was merely to prepare a formal draft contract to be sent to the other side for perusal and approval.

The cases that have followed Smith v Webster have restricted its scope.

Thus, in John Griffiths Cycle Corporation, Limited v Humber & Co, Limited [1899] 2 QB 414 the Court of Appeal held that Smith v Webster was not to be taken as meaning that the agent must have had authority to sign the document as a record of the contract. All that Smith v Webster decided was that, in order to satisfy the Statute, you must show that the agent signing was an agent “thereunto lawfully authorised” i.e. that he was authorised to sign the document which referred to and recognised an agreement in the terms relied on. It was, the Court held, undoubted law that a signature to a document containing the terms of a contract could satisfy the Statute, although put alio intuitu and not in order to attest or verify the contract. In Smith v Webster, the court said, the solicitor was “not expressly authorised to sign any document recognising the document which in fact contained the proposed terms” (Footnote: ⁹ ) . Per contra, in John Griffiths officers of the defendants had, in the course of what they were authorised to do, written to the plaintiffs with regard to the supply of goods in terms which, the Court held, did refer to and recognise an agreement in the terms contained in a schedule to a memorandum of agreement, which had not itself been executed.

In Daniels v Trefusis [1914] 1 Ch 788 Mr Trefusis agreed with an agent called Mr Girdlestone to buy a house for £ 700. Girdlestone was in fact acting for a Mr Daniels but later claimed to be a principal who had bought from Mr Daniels for £ 600 and was sub-selling to Mr Trefusis at an increased price. Girdlestone commenced an action against Mr Daniels for specific performance of the agreement said to have been made between them. In the latter action (which was ultimately dismissed) Mr Daniels’ solicitors wrote to Mr Trefusis’ solicitors asking for a short statement from Mr Trefusis as to what had occurred between him and Mr Girdlestone. The solicitors sent an unsigned statement by Mr Trefusis as to the verbal agreement he had made with Mr Girdlestone, and, later, replies to certain questions which Mr Daniels’ solicitors had posed. The accompanying letter said that they enclosed the questions with what were, and were said by them to be, Mr Trefusis’ answers. These answers were not, however, signed by him. It was common ground that the statement, answers and accompanying letter were sufficient to constitute a note or memorandum for the purposes of the Statute. When Daniels as vendor began an action against Trefusis as buyer Trefusis alleged, inter alia, that there was no memorandum satisfying the Statute.

Mr Trefusis contended that the solicitors were not in fact acting as his agents in providing the statements or proof from him, but were acting on behalf of the plaintiff, and that in any case their authority did not extend to signing a note or memorandum of the contract on the defendant’s behalf. Sargant J held that the first objection was untenable and that the second also failed. The solicitors had authority to forward to the plaintiff’s solicitors the documents which they sent. It did not matter that they may not have been contemplating that those documents would form a memorandum for the purposes of the Statute.

“The unintentional by-product of satisfying the Statute may be produced as completely by a note or memorandum signed by an agent of the party as by a note or memorandum signed by the party himself, provided, of course, that the agent had authority to sign the particular note or memorandum”.

In North v Loomes [1919] 1 Ch 378, N agreed to sell to L certain premises in Chinnor for £ 590 and gave him a receipt for a £ 50 deposit. The receipt, which was regarded by both parties as their contract, was in the following terms:

“Received of [L] the sum of £ 50 on the purchase price £ 590 for the house and premises and land…The balance of the purchase price to be paid on or before March 25 ^th 1918. Purchase price £ 590. Deposit £ 50. Balance £ 540.”

N signed the receipt.

L sent the receipt to his solicitor with instructions to carry out (i.e. complete) the agreement which L had made. N’s solicitor sent to L’s solicitor a draft contract. L’s solicitor wrote back on 8^th February:

“I need not trouble you to send me another contract as the one which your client has signed is, I think quite sufficient”.

The “one which your client has signed” was a reference to the signed receipt.

Younger J held that the letter of 8^th February was authorised by L because instructions to complete impliedly authorised, when necessary, the affirmation on behalf of the client, of the contract made by him and, because the solicitors were so authorised, the receipt was a sufficient memorandum for the purposes of the Statute.

The upshot of these cases is that, if a document is executed by an agent which records the terms of the sale, it is not necessary, in order to satisfy the Statute, that the agent should have been authorised to execute the document as a record of the transaction; but it is necessary that the document, which is a record of the transaction, is one that he is authorised to execute by the person sought to be charged.

It is common ground between the parties that an electronic signature is sufficient, and that a first name, initials, or, perhaps, a nickname will suffice. But there must be something, which can be regarded as a form of signature, which is voluntarily affixed to the document by way of authentication thereof (see Caton v Caton [1867] LR 2 HL 127).

In Leeman v Stocks [1951] 1 Ch 941 the plaintiff was the highest bidder for certain premises at a public auction. Before the auction the auctioneer borrowed from a solicitor, who was present at the auction but who had nothing to do with the premises, a form for sale by private treaty. A number of its provisions were inapplicable to the vendor’s property. The solicitor edited the document and put in the date for completion. The auctioneer put in the vendor’s initials and surname (“W.E.Stocks”).

After the premises had been knocked down to the plaintiff, the auctioneer inserted the purchaser’s name and address, a description of the premises and the auction price and, when he had obtained it, the purchaser’s solicitors name. The document ended with the words “As witness the hand of the parties hereto the day and year before written. Purchaser’s solicitor, R.A.C. Symes & Co, Southampton”. The purchaser signed the document over a stamp. The auctioneer told the vendor of the sale but did not show him the document. Neither he nor the vendor signed the document in the ordinary sense of the word. The vendor refused to complete alleging that there was no note or memorandum.

Roxburgh J held that the auctioneer was the agent of both parties; and that he had authority to put before the purchaser, as he did, a document containing the name of the vendor as the party with whom the contract had been made, and the terms of the contract which had been made, for him to agree in writing. The placing of the name “W.E. Stocks” as the name of the vendor with whom the contract was made by the auctioneer was sufficient to count as a signature of a memorandum by an authorised agent.

In so holding he relied on the observations of Denman J and Cave J in Evans v Hoare [1892] 1 QB 593. He also held that, although the vendor’s name was not inserted in the first instance with reference to a contract with the purchaser, nevertheless when it was put before the purchaser for signature, the vendor’s name was in the document in relation to a contract which had become binding, albeit not actionable without a memorandum satisfying the statute.

The point which troubled him was that the document by its own terms contemplated that it should be signed in the ordinary sense by both parties, from which it could be said that until then it had not been signed at all. As to that he held that when the auctioneer obtained the purchaser’s signature neither he, on behalf of the vendor, nor the purchaser intended any other signature ever to be added; but that both intended the document with the purchaser’s signature to be the final written record of the contract. The court could examine the evidence to see if the document relied on came into being as a “perfect instrument” i.e. as the intended final embodiment of the agreement and, if it found that it did, the court was not prevented from holding it to be a sufficient memorandum.

Leeman v Stocks appears to me a case which stretches the concept of “signature” close to its limits. The “signature” was constituted by the auctioneer writing the vendor’s name at the beginning of a document which was then tendered to the purchaser and signed by him. I do not regard Roxburgh J’s reference to the “perfect instrument” as meaning that there is a species of document which can count as a memorandum although unsigned; but as indicating that, if the document is the document which the parties intended to be the final record, the fact that it referred to a signature (in the conventional sense) from both parties did not prevent the insertion of the name of the vendor by his authorised agent being regarded as a signature, where that document was presented to the purchaser for signature (as occurred) after the sale.

The Court has in other cases shown itself somewhat generous in deciding what is a signature. Thus in Bluck v Gompertz [1852] 7 Ex 862 the defendant signed an undertaking to procure the acceptance of two bills for £ 200 and £ 146 for wine supplied to an MP and agreed to see that they were duly paid. The latter draft should have been for £ 150. The plaintiff drew bills for £ 200 and £ 500 and the defendant saw that they were accepted. The defendant wrote across the guarantee “I have received the two drafts, one being for 150l, instead of 146l, the other being an error in the invoice of 4l”). The plaintiff signed this but the defendant did not. The guarantee as endorsed was treated as a valid memorandum of the contract since the endorsement had been made for the purpose of correcting the mistake and, being written by the defendant on the same piece of paper as he had originally signed, his original signature was plainly intended to authenticate the memorandum as amended, and could therefore be considered as doing so, notwithstanding that the words written on the paper by the defendant were written as the words of the plaintiff. Pollock CB said that the court had come to its conclusion not without some difficulty. Baron Parke said he had had great difficulty in bringing his mind to this conclusion. The case also affords an illustration of a guarantee which preceded the “main contract” which was constituted by the MP’s acceptance of the bills.

There is authority that the insertion of a person’s e-mail address by an internet service provider after the document has been transmitted is, absent evidence to the contrary, incidental and not, as is requisite, intended as a signature, even if the address contains the sender’s name: Pereira Fernandes v Mehta [2006] 1 WLR 1543; Sean Lindsay v Jared O’Loughnane [2010] EWHC 529, para 95, a decision under section 6 of the Statute of Frauds (Amendment) Act 1828. But an e-mail, the text of which begins “Paul/Peter”, may be regarded as signed by Peter because by that form of wording Peter signifies that he is addressing Paul and authenticates the content of the whole of what follows: see Evans v Hoare [1892] 1 QB 593; Caton v Caton (1867) LR 2 HL 127.

None of these cases affect the analysis in paras 47 - 65 above. The e-mails which constitute the contract are signed by the electronically printed signature of the persons who sent them.

Golden Ocean suggested that an e-mail of 8^th January 2001 from Mr Hindley to Mr Hintz could constitute a memorandum. That e-mail rejected an offer from Golden Ocean and made a counter offer “a/c Trustworth Shipping Pte Limited Singapore fully guaranteed by Salgaocar Mining Industries Goa”. After the offer Mr Hindley wrote “Little way to go but I hope along the right lines”. As is apparent from what I have already said (see paras 76 and 79 above) that will not suffice. It is simply an offer of a charter on certain terms to be guaranteed by SMI. The terms of the charter are not agreed and are not the same as the terms that were agreed: the putative memorandum is not a memorandum of a contract of guarantee that has been made but of a contract that might be made.

Mr Young told me, in the course of Mr Kendrick’s submissions that, despite the terms of his skeleton (Footnote: ¹⁰ ) , what he intended to submit was that a note or memorandum of the agreement of guarantee could be found in the sequence of e-mail communications down to the recap of the MOA terms on 21^st February 2008. This sequence involved e-mail correspondence (a) between Golden Ocean and Mr Hintz (or Mr Hall) at Howe Robinson, acting on their behalf; (b) between Mr Hintz (or Mr Hall) for Golden Ocean and Mr Hindley, acting (or purporting to act) for Trustworth and SMI; and (c) between Mr Hindley and Mr Salgaocar, who does not appear to be computer literate and who does not respond by e-mail. Throughout the charterer is referred to as “Trustworth Pte Limited Singapore fully guaranteed by Salgaocar Mining Industries Goa.”. It is this reference, when contained in e-mails in the last two categories, signed by Mr Hindley, which he relies on as notes or memoranda.

None of these communications prior to 21^st February will suffice as a note or memorandum of an agreement of guarantee and for the same reasons. Prior to that date there was no concluded agreement on the terms of the charterparty and MOA and thus no contractually binding agreement either to charter or to guarantee. It is immaterial that the wording “fully guaranteed by [SMI]” remained the same since it could not be known whether there would be a guarantee, and of what, until agreement on the charterparty had been concluded. The e-mail communications are negotiating documents of agreements to be made, whose possible terms varied as the negotiations progressed, not memoranda setting out the terms of an agreement that had been made. Until the conclusion of the charterparty the words relied on are no more than an offer to guarantee in respect of obligations yet to be determined.

On 7^th March 2008 someone at Howe Robinson drew up an internal fixture note which referred to the vessel as Golden Beijing, set out details of the charter, named “HR Brokers” as “GCH + BMH” i.e. Mr Hindley and Mr Hintz, and “Our principals” as “Salgaocar (GCH) Golden Ocean Spore (BMH)”. On 13^th March 2008 the note was re-drawn so as to refer to the Vessel as Golden Ocean Jinhaiwan Newbuilding Cape TBN (Intention Golden Beijing).

On 17^th July 2008 Mr Flaaten of Golden Ocean e-mailed Mr Hintz with comments on a working copy of the Golden Ocean Charterparty dated 2^nd February 2008 saying:

“After having made the above corrections you are herewith authorised to sign the above on behalf of Owners”.

Mr Hindley appears to have received a copy of this e-mail because he e-mailed it to “Lisa”, a Howe Robinson employee, asking for a copy of the charterparty so as to check the comments.

Nothing seems to have happened for a while. On 19^th November 2008 Mr Flaaten e-mailed to Mr Hintz the following on top of his e-mail to Mr Hintz of 17^th July 2008:

“Trustworth/Salgaocar should have had ample time to review cp and comments below by now

Please push for a signature from both

If guarantor doesn’t sign we need to have a guarantee letter drawn up as well

But sufficient for us if they co-sign the cp

Please forward a copy of the corrected cp signed on our behalf”

On 20^th November 2008 Ms Chrusciel of Howe Robinson e-mailed to Mr Flaaten a copy of the charterparty corrected as per his comments of 17^th July and said that Howe Robinson was arranging the signature on Golden Ocean’s behalf “as per the authority given to us on 17.7. Kindly re-confirm in order.” On 2^nd December 2008 the request was repeated. On the same day Mr Flaaten replied asking Ms Chrusciel to have it signed on Owners behalf and forwarded to Charterers for their signature.

At some date between 2^nd and 11^th December 2008, Howe Robinson, as I infer, added to the charterparty by typing in below “Owners” the words:

On 11^th December 2008 Ms Chrusciel e-mailed to Mr Salgaocar a copy of the original of the charterparty signed by the Owners and asked for authority to sign the same on his behalf. Nothing seems to have come of this.

On 26^th February 2009 Mr Flaaten e-mailed Mr Hintz to say that he needed a signed version of the charterparty signed on Golden Ocean’s behalf and sent out to charterers adding “Needs two signatures: Salgaocar being the important one”.

In those circumstances Mr Kendrick is right to submit that the working charterparty is not the type of “perfect instrument” to which Roxburgh J was referring. It was a document intended to be signed by both parties and only signed by one and was not authenticated by or on behalf of Trustworth or SMI. It was not intended, in the form which it took, as the final record of agreement.

I cannot regard the working charterparty with its guarantee as a sufficient memorandum for the purposes of the Statute. The question is whether the charterparty was drawn up with the authority of SMI and records the terms of the guarantee; not whether Howe Robinson was authorised to draw it up as a record of the guarantee, nor whether Howe Robinson was authorised to sign it as a contract. In fact, however, it was drawn up and signed on behalf of the Owners. That is apparent from the e-mail correspondence to which I refer in paras 109 - 114 above and the fact that it embodies the corrections made by Golden Ocean in the e-mail of 17^th July. It was never signed on behalf of the charterers because Mr Salgaocar never gave Howe Robinson authority to do so. It is not necessary to decide what might have been the position if Mr Salgaocar had authorised Howe Robinson to sign and they had done so under the words “Charterers” without any reference to the guarantee.

I do not regard the Howe Robinson stamps on the pages of the NYPE form as taking the matter any further. They were no doubt put there when the working charterparty was drawn up (incorporating Golden Ocean’s corrections). There is no evidence that they were somehow applied on behalf of charterers or the guarantor.

Those conclusions are consistent with what Mr Kerr-Dineen of Howe Robinson said in his e-mail of 31^st December 2009:

“I would like to make it clear that no other documents (i.e. other than the recap) in respect of either the charterparty or the guarantee have been signed by Howe Robinson on behalf of either Trustworth or SMI. So far as we are aware the charter party was never actually signed by Trustworth or SMI”

although that statement does not deal in terms with whether Howe Robinson drew up the working charterparty on behalf of SMI.

If I had held that, on the material presently before me, there was no agreement in writing or no sufficient note or memorandum, it would then have been necessary to consider whether I should decline to set aside my order on the basis that disclosure might reveal some note or memorandum signed by Mr Salgaocar (or someone else on behalf of SMI). Mr Young submitted that it was inherently likely that such a document existed.

I do not think it necessary to decide this point and do not do so. It is sufficient to say that, as it seems to me, a person who wishes to invoke the court’s jurisdiction in relation to a foreign defendant needs to show that he has an actionable claim worthy of serious consideration on the material which he presents to the court. It is not sufficient for him to show that he has a claim which, on the material before the court, is not actionable but which might later turn out to be so once disclosure has been given. He needs to show, at this preliminary stage, the existence of a sufficient memorandum. In addition the Statute itself is a prohibition against the bringing of an action absent a memorandum.

Mr Kendrick had a further point which he developed in this way. Generally speaking a chartering broker has no actual authority to charter a ship; The Suwalki [1989] 1 Lloyd’s Rep 511 (“A broker, or even an exclusive broker, is not in the shipping trade regarded as having authority to commit his principals without reference back to them”). Mr Salgaocar told the brokers that he had authority to act for SMI. In fact he needed Board approval. But, if he had no such authority, the need for it could not be circumvented by his (the agent’s) statement that he had it: The Ocean Frost [1986] AC 717. However, in certain circumstances an agent who has no actual or apparent authority to conclude a particular transaction may have apparent authority to convey certain information e.g. that a requisite consent or approval has been given: First Energy v HIB [1993] 2 Lloyd’s Rep 194. Whether Mr Salgaocar had apparent authority to communicate to Howe Robinson that a guarantee had been approved by SMI is, he accepts, a matter for trial.

But that begs the question as to whether SMI purported to give a guarantee at all. As to that, Howe Robinson indicated in their e-mails that they were acting for charterers; thus the “subjects” to be lifted involved approval by the Board of Trustworth, not SMI. Further the words “a/c Trustworth Shipping Pte Limited Singapore fully guaranteed by Salgaocar Mining Industries Goa” are not, on their true construction, to be taken as a guarantee itself but as an undertaking to procure such a guarantee, which could either have been given on a separate document or by SMI signing the charter.

I do not accept this. It seems to me that the use of the phrase “fully guaranteed by [SMI]” signified that the charterparty, once its terms were agreed, was one that was then guaranteed by SMI. The words do not have any element of futurity in them (they do not, for instance, even say “to be guaranteed”). Trustworth was a company nominated by SMI. Mr Salgaocar was the individual who acted or appeared to act for both. There is no indication in the e-mails that the contract of guarantee was “subject SMI’s approval” or that, after all the terms were agreed it would be necessary for Trustworth to approach SMI to obtain its guarantee. The parties appear to have proceeded on the basis that, if Charterers’ approval was obtained, there was no need for a separate SMI approval. In those circumstances the idea that, after all the terms were agreed, no guarantee was yet in existence seems to me artificial. This is especially so if, as is conceded to be arguable, Mr Salgaocar had actual authority to bind both Trustworth and SMI. At any rate I decline to hold that Mr Kendrick’s construction is indisputably right. Golden Ocean has a well arguable claim in this respect.

Mr Charles Kimmins, QC, for Mr Salgaocar, submits that the fact that Mr Salgaocar must, for present purposes, be assumed to have had authority to bind SMI, does not mean that Howe Robinson had such authority. That begs the question as to whether Mr Salgaocar authorised Howe Robinson to bind SMI. In his 3^rd witness statement Mr Chetwood reports what Mr Salgaocar has said, which is that, on his understanding, SMI would only ever give a guarantee of this kind if it was contained in a separate document and signed by SMI; and that he did not grant Howe Robinson authority to conclude or sign the guarantee on behalf of SMI in 2008. As far as he was concerned if Golden Ocean wanted a guarantee from SMI they would need a properly executed guarantee contained in a separate document duly signed by SMI.

The fact, he submits, that Charterers reportedly lifted the “subject” of their board approval on 15^th January as per Mr Hindley’s e-mail (“Pleased to confirm Charterers have lifted their subjects”), does not mean that Mr Salgaocar, even if he had authority to bind SMI, chose to authorise Howe Robinson to do so. I agree. But, in circumstances where, for present purposes, it is to be assumed that he had such authority, where the e-mail negotiations were effected by Howe Robinson on Mr Salgaocar’s instructions (he being notified of what was being negotiated), and where what was ultimately agreed arguably amounts to a guarantee, and not merely a promise to procure one, it is well arguable that he authorised Howe Robinson to bind the guarantor i.e. SMI, on whose authority he had power to act.

This is particularly so in circumstances where (a) there is no witness statement from Mr Salgaocar or Mr Hindley which reveals that the latter was ever told by the former that he had no authority to conclude the negotiations on behalf of SMI; (b) there are 36 fixtures where SMI guaranteed Trustworth by the same one line reference in the charterparty and where the guarantee was not contained in a separate letter (see para 10 above). That is a form of guarantee which, in Howe Robinson’s experience, is common in the chartering business, the use of a separate letter occurring in only a minority of cases.

In addition it seems to me arguable that, if Howe Robinson were not given actual authority to bind the guarantor, they had at least apparent authority to do so or, at least, to communicate Mr Salgaocar’s agreement on behalf of SMI. Mr Kimmins accepted that that point might normally be open at this stage to someone in the position of Golden Ocean but that, in the present case, it could not be because Golden Ocean did not think that any contract of guarantee had been entered into as appears from the fact that in November 2008 they pressed for signature from both charterer and guarantor or, if the guarantor did not sign the charterparty, a guarantee letter.

I do not think that the November correspondence is fatal to any claim based on ostensible authority. The fact that Golden Ocean pressed for two signatures in November does not necessarily mean that they must have thought there was no contract of both charter and guarantee in February. A charterparty signed twice, once for the charterer and once for the guarantor, or a charterparty signed once together with a guarantee letter would have resolved any question as to whether there was a binding agreement on both counts. But the absence of such documents does not mean that there was not, or could not have been thought to have been, such an agreement in February. Further, it would seem unlikely that Golden Ocean would have lifted their “subject” if they thought that there was no binding guarantee in place once the charterers had lifted theirs.

I am, therefore satisfied:

I am also satisfied that Mr Salgaocar is a necessary or proper party to the claim against SMI, since there is a claim against him for breach of a warranty of authority in respect of both Trustworth and SMI. Mr Salgaocar is a necessary or proper party because the sensible course is to try the alternative claims in the same proceedings, so as to avoid the risk of inconsistent findings and waste of costs. It does not matter for that purpose whether English or Indian law governs.

That conclusion makes it strictly unnecessary to decide which side has much the better of the argument in relation to the proper law of the claim against Mr Salgaocar. That is, for present purposes, the relevant test: see Cherney v Deripaska [2008] EWHC 1530 (Comm); Rimpacific v Daehan [2010] 2 LL.R 236 [26] and the cases there cited. Since, however, the matter has been argued I shall express my conclusions briefly.

The claimants do not submit that there was any implied or inferred choice of law so that Article 3 of the Rome Convention applies; but that Article 4 of the Convention does. That Article provides:

“(1)

To the extent that the law applicable to the contract has not been chosen in accordance with Article 3, the contract shall be governed by the law of the country with which it is most closely connected. ...

(2)

Subject to the provisions of paragraph 5 of this Article, it shall be presumed that the contract is most closely connected with the country where the party who is to effect the performance which is characteristic of the contract has, at the time of conclusion of the contract, his habitual residence ....

(5)

Paragraph 2 shall not apply if the characteristic performance cannot be determined, and the presumptions in paragraphs 2, 3 and 4 shall be disregarded if it appears from the circumstances as a whole that the contract is more closely connected with another country.

I do not accept Mr Kimmins’ submission that the characteristic performance of a warranty of authority contract is the provision of the warranty. The provision of the warranty is the promise, not the performance of it. A person who warrants his authority warrants that a state of affairs exists. The warranty is fulfilled if he has the authority which he claims to have. It is a somewhat curious use of language to describe that as a performance effected by the warrantor, an expression more easily applicable to a physical act. But since, in essence, the warrantor agrees to see to it that he has authority, he can properly be regarded as the party who is to effect the performance which is characteristic of the contract. In addition there is no one other than Mr Salgaocar who can be said to perform the contract (Footnote: ¹¹ ) . Accordingly the contract is to be presumed to be most closely connected with India, Mr Salgaocar’s habitual residence.

The next question is whether it appears from the circumstances as a whole that the contract whereby Mr Salgaocar warranted his authority is more closely connected with England. Golden Ocean submits that that is so because English law was to govern the guarantee and charterparty, which, had he had authority, would have been concluded between Mr Salgaocar and his apparent principals. There is an express choice of English law in the charterparty, which also contains the guarantee. Golden Ocean supposed itself to be contracting with SMI for the provision to it of a guarantee to be governed by English law. It was entitled to expect that the question of Mr Salgaocar’s warranty of authority should be determined by the system of law by reference to which he was negotiating the contract in respect of which he purported to act as agent.

Such an approach seems to me to fall foul of the observations of Hobhouse LJ (with whom the rest of the Court agreed) in Credit Lyonnais v New Hampshire [1997] 2 Lloyd’s Rep 1 in connection with the provisions of sections 2 (2), (3) and (4) of Schedule 3 A of the Insurance Companies Act 1982, which were similar in terms to sections (1), (5) and (2) of article 4 of the Rome Convention, when he said [p 7]:

“I accept the defendants’ submission that once it is seen that there is no choice of applicable law satisfying par. 2 (i) of the schedule, the question of choice and absence of choice becomes irrelevant to the question of ascertaining with what State the contract is most closely connected. Similarly to refer to the contemplation by one party or another that certain local laws may or may not be relevant is to be influenced by considerations of inferred choice and connection with legal systems and not with the question of performance and the location of performing parties.”

This passage was quoted with approval in Samcrete Egypt Engineers and Contractors S.A.E. v Land Rover Exports Ltd [2001] EWCA Civ 2019.

In the present case any contract whereby Mr Salgaocar warranted his authority to act for SMI seems to me more closely connected with India, where he and SMI resided and where he would secure the necessary authority from SMI. Further Indian law is the law which governs the relationship between SMI and Mr Salgaocar; and the claim for breach of warranty of authority only arises if there is no valid contract (under any law) between Golden Ocean and SMI. At any rate Golden Ocean has not persuaded me that it has much the better argument on this point; that distinction belongs to the defendants.

Accordingly I would not allow the permission to serve Mr Salgaocar out of the jurisdiction to stand on the basis that any warranty of authority contract was governed by English law.

I turn to consider the question of the appropriate forum i.e. the forum in which the case can most suitably be tried in the interests of all the parties and the ends of justice. A number of factors are of relevance in determining that question. These include (a) the applicable law, (b) the location of the parties, the likely witnesses, and the documents.

As to (a), the contract was negotiated in England through English brokers, and the parties expressly chose English law. Those are potentially powerful factors in support of England as a forum. They are not, however, conclusive. The significance of the fact that English law is the law of the contract depends on all the circumstances. In “The Elli 2” [1985] 1 Lloyd’s Rep 107 Ackner LJ observed that where exclusive reliance was placed on the contract being governed by English law, the burden of showing that there was good reason justifying service out of the jurisdiction was a particularly heavy one.

In the present case two circumstances seem to me of especial importance.

The first is that a major issue in the present case is the application of the Statute of Frauds. The English Courts are markedly better equipped to deal with the validity of a defence based on this ancient English Statute than any other. It does not seem to me satisfactory to have such an issue determined by expert evidence of English lawyers. The proper interpretation of the Statute of Frauds is not something beyond further development (which can only be judicial), and its proper application is not entirely straightforward (as the cases to which I have referred and the current controversy show). In those circumstances it is an issue much better left to the determination of an English judge.

The second is that it appears from the third witness statement of Mr Hughes on behalf of SMI that as a matter of Indian law, on which he exhibits advice from DSK Legal, a firm of advocates in Mumbai, the Guarantee is void and will not be enforced in the Indian courts because it was entered into in contravention of the Foreign Exchange Management (Guarantees) Regulations 2000. If this be so, any claim by Golden Ocean would be doomed to fail in India when it would not do so (on that account) in the courts of this country whose law the parties have expressly chosen. There is no evidence from Golden Ocean accepting what Mr Hughes says about Indian law; but no refutation of it either. At the very lowest there is a very real risk that what he records is right.

No party has an automatic right to have the English Court exercise jurisdiction over a foreign company just because in the courts of another State, in which the claim would otherwise be tried, the claimant would be likely to fail. A party has, as Mr Kendrick put it, “no vested right to win”. But the fact that an arguable claim under a contract governed (in English eyes) by English law will fail if it is adjudicated on in the only realistically alternative foreign court, because that court will apply some provision of its own law which invalidates a contract on the grounds of statutory prohibition or public policy, is a powerful indicator that England is the place where the claim can most suitably be tried for the interests of all the parties (which are that their disputes be determined in accordance with the law applicable to the contract between the parties) and the ends of justice (which are that the legitimate expectations of the parties, derived from the comtract, are not confounded): The Magnum [1989] 1 Lloyd’s Rep 47 (Footnote: ¹² ) ; Banco Atlantico SA v British Bank of the Middle East [1990] 2 Lloyd’s Rep 504 (a stay case in which Bingham LJ regarded it as not conducive to justice to require a party with an arguable claim under Spanish law, which the English court would hold to be the proper law [and also under English law if it were relevant] to litigate in a jurisdiction – Sharjah -where it would be bound to face summary rejection of its claim under the laws of that country).

I refer also to Stonebridge Underwriting Ltd v Ontario Municipal Insurance Exchange [2010] EWHC 2279 (Comm), in which I regarded it as significantly in favour of English jurisdiction that, if proceedings took place in Ontario, there was a real risk that the Ontario Court would apply the law of Ontario so as to deprive the insurers of a defence open to them under English law, which an English court was likely to hold the parties impliedly to have chosen. I also indicated that I would have regarded it as significant if English law was applicable only by virtue of its being the law of the place of central administration of the party who was to effect the performance which was characteristic of the contract.

It is nothing to the point that the contract may have been illegal in India. The guarantee was not to be performed in India. A contract which is illegal in the defendant’s country but does not have to be performed there is enforceable by an English Court: Kleinwort Sons v Ungarische Baumwolle Industrie Aktiengesellschaft [1939] 2 KB 678; Toprak v Finagrain [1979] 2 Lloyd’s Rep 98.

The observations in the last two paragraphs beg the question as to what law governs the guarantee. As to that the Rome Convention provides:

The charterparty terms provide for “this charter” to be governed and construed in accordance with English law. Although that clause does not refer to “this charter and guarantee” it seems to me that, in circumstances where the guarantee, if given at all, is constituted by the words in the charter “TRUSTWORTH…fully guaranteed by [SMI]” the parties’ choice of English law to govern the guarantee is demonstrated with reasonable certainty by (a) the inclusion of the guarantee within the terms of the charter, (b) the fact that the parties have expressly chosen English law as the law of the charter and (c) the incongruity of having some different law applicable to the guarantee. At the lowest there is a strong likelihood that English law is the proper law (Footnote: ¹³ ) .

These two matters point, in my judgment, strongly in favour of England such that, in the absence of some sufficient countervailing circumstances, England is decidedly the most appropriate forum.

As to (b), the claimant is a Bermudan corporation but its personnel are based in Norway; the defendants are Indian. The relevant witnesses are likely to be in Norway (where Mr Flaaten and Mr Syberg are to be found), Singapore, where Trustworth is incorporated, where Mr Zorn and Mr Zhang are; China (where the vessel was being built), England, where the brokers are, and India where Mr Salgaocar and the directors of SMI reside. The brokers and Mr Salgaocar (and to a lesser extent his family) are by far the most important witnesses. The evidence of the brokers goes to the making of the contract, and the impact of the Statute of Frauds (although the evidence is predominantly documentary), and the question of Mr Salgaocar’s authority. The evidence of Mr Salgaocar and the directors of SMI goes to the extent of his authority. There may, according to Mr Hughes’ 3^rd statement (paras 37-8), be some SMI employees to be called as witnesses, although the significance of their evidence is not apparent to me.

The brokers are in London (as are many of the most relevant documents) and it would be manifestly convenient for the three broker witnesses to give evidence here. There may be substantial disclosure to be given of documents which are in India; but I have no reason to believe that it is of such a magnitude as would make proceedings in India necessary. The physical location of the documents not so far disclosed is of very limited significance.

Mr Salgaocar is obviously a particularly important witness, especially on the question of authority, actual or apparent, the conduct of the negotiations through Howe Robinson and his involvement in previous fixtures. He is likely to face searching cross examination. He is 70 years old on December 26^th and, unfortunately, in poor health.

There is before me a doctor’s opinion dated 22^nd June 2010 which indicates that he suffers from a number of complaints including: (a) diabetes (diagnosed in 1982), which is fair to moderately controlled; (b) poorly controlled hypertension of 30 years standing; (c) coronary artery disease for 15 years; (d) obstructive sleep apnea for several years; (e) hospitalisation for acute respiratory distress and failure in December 2009 (when, in the doctor’s words, he escaped from the jaws of death); (f) peripheral arterial disease; (g) a history of a fracture of his left fibula in April 2009 from which he has not fully recovered; and (h) damage to his vertebra and severe back muscle spasm as a result of a motor accident in 1964, leading to degenerative disc disease which at times causes debilitating pain and immobility. He is at high risk of deep vein thrombosis on long-haul flights; and of hypoxia/hypoxemia with potentially devastating events particularly if he is in a jet aeroplane for more than about 2 hours. He has a nurse at his home which is equipped with oxygen cylinders. He has been advised to avoid flying altogether, and, if he has to, not to take a flight lasting more than 4 hours and to be accompanied by a nurse or doctor for any flight between 2 and 4 hours. His doctor expresses concern as to the potential impact on his health of appearing in a foreign court and expresses the view that it would be significantly less stressful if he were to give evidence in his home environment and in several short sessions.

I note that, certainly until the middle of 2010 Mr Salgaocar has been active in a number of ways. He is a member of the Goan Assembly. His health is said to have declined in recent months. I note, however, that he has been significantly involved in some long running legal proceedings in India in respect of an SMI vessel, the “River Princess”, which grounded on a beach in Goa, and that his involvement has continued after the date of the doctor’s report.

Mr Salgaocar is said to have an active mind; to be well enough to give evidence in India and to be fully prepared to do so (see SMI skeleton, para 83). I shall assume that he is very likely, if well enough, to be a witness at the trial, although I do not regard that as practically certain, e.g. if, in his own interests, he no longer sought to contend that he had no authority to bind SMI.

I am not persuaded that his state of health is a factor which should cause me to reject England as the appropriate forum. There will be potential problems in his giving oral evidence wherever he does so since the matters set out in the medical report indicate a risk to his health if he gives evidence in any court, whether in India or England. But I see no sufficient reason why, if it is inappropriate for him to give evidence in court, he cannot give evidence by video link either from his home or office or some other suitable place – an arrangement increasingly common in this and other courts; and one which would have the added advantage that he was in an environment which was likely to be less stressful than any other alternative. I do not accept that evidence by video link is inappropriate for a case which may involve sustained and testing cross examination, particularly when that testing is likely to be by reference to documents.

So far as the other non English witnesses are concerned it would obviously be more convenient for the Indian witnesses if they could give evidence in India. As to the others the difference, so far as convenience is concerned, between giving evidence in India or England does not seem to be marked. In any event the evidence of any non English witnesses who do not come from India is much less significant than that of the Indian witnesses; and should be capable of being given, if necessary, by video link.

Mr Kendrick points to the fact that litigation is already on-going in India in respect of the alleged guarantee and submits that the English court should, at the very least, stay the present proceedings until the application of Golden Ocean challenging the jurisdiction of the Indian Court has been resolved, and, if the challenge fails, decline to exercise jurisdiction. Mr Kimmins for Mr Salgaocar supports that submission.

I do not agree. The proceedings in India are at a preliminary stage. Their existence is a relevant factor to consider; but not one which, in my judgment, is of significant weight in favour of India as a forum. There is also evidence from Golden Ocean’s Indian lawyers, in part supported by a recent article in the Times of India, that because of the heavy backlog of cases at Panaji it would take between 4 and 10 years for the case to proceed to trial at first instance alone. This militates against an Indian hearing.

There is a dispute on the evidence as to whether England or India would be a more expensive forum for this type of dispute. SMI has adduced the evidence of three Indian advocates to the effect that that is so. By contrast Mr Hickland refers to conversations to the contrary with another Indian advocate. I am prepared to assume that England is likely to be more expensive than India; but in a claim of this type and magnitude that differential does not seem to me particularly material to the forum conveniens issue.

Mr Kendrick submitted that a key issue in the dispute is whether Mr Salgaocar was authorised by SMI; and that an English Court would have to apply Indian law to the question pursuant to section 36 of the Companies Act 1985, as amended by Regulation 4 of the Foreign Companies (Execution of Documents) Regulations 1994 (as amended), which provide that

“Under the law of England and Wales a contract may be made–

It does not seem to me that Indian law is, in this respect, a key issue. That law is relevant to Mr Salgaocar’s actual authority; but the better view is that the Regulations have no bearing on the question of ostensible authority: see Rimpacific v Daehan [2010] 2 Lloyd’s Law Rep 236, paras 28-34. Further it is not apparent to me that Indian law on authority (actual or apparent) is any different from that of England, or that, to the extent that it is, it is in any way recondite.

The defendants complain that at the ex parte stage Golden Ocean failed to disclose the fact that Howe Robinson, in the person of Mr Hintz and Mr Hall, acted on behalf of Golden Ocean, and that the only documents then relied on as memoranda of the guarantee were Mr Hintz’s e-mail of 11^th January and the working charterparty. They also complain that the court’s attention should have been drawn to the correspondence in which SMI’s signature on the charterparty was sought.

There is some substance in these complaints. It was material for the court to know that Howe Robinson was acting for both sides; and that the documents relied on as memoranda were not (or may not have been) signed on behalf of SMI, although, as this judgment indicates, there are in fact other e-mails which could have been relied upon. It was also material to see the correspondence relating to SMI’s signature on the charterparty.

It was sensibly not submitted that I should set aside my order on the ground of non-disclosure ground alone and I shall not do so. I am satisfied that there was no deliberate non disclosure and that it would be entirely inappropriate to set aside an order which I am otherwise satisfied should stand on account of such non-disclosure as there was. I do not, therefore propose to consider the question any further in this judgment. I will hear any submissions that may be made as to whether it has any, and, if so, what impact on costs.

Accordingly I decline to discharge the order which I made in March 2010.