#5194 - Golden Ocean Corp V. Salgaonkar Mining - Conflict of Laws BCL

Golden Ocean Corp v. Salgaonkar Mining

Facts

The context in which the application of section 4 falls to be considered on this appeal is very familiar. It is the conclusion of a long-term, ten-year, time charter of a valuable vessel, a newbuilding Capesize bulker of 176,000 tonnes deadweight. The owners, Golden Ocean Group Ltd, hereinafter (“Golden Ocean”) were negotiating for the hire of their vessel to a substantial conglomerate of industries, the Indian company Salgaocar Mining Industries Pvt Ltd, to which I shall refer hereafter as (“SMI”). SMI is based in Goa. Like many other similar conglomerates SMI has a chartering arm, here Trustworth Shipping Pte Ltd, hereinafter (“Trustworth”), a Singaporean company. There may be issues at trial as to the status and purpose of Trustworth, but it is unlikely to be denied that since about the end of 2005 Trustworth has chartered many vessels and carried in them from India to, mainly, China, cargoes which SMI had sold.

So however is the quid pro quo, that an owner asked to deal with such a charterer would often and perhaps ordinarily be unprepared to do so save on terms that its obligations are fully guaranteed by its parent or some other company of substance. The transaction here followed that familiar pattern. Here, Salgaonkar guaranteed the charter between Trustworth and Golden Ocean Group.

The procedural context in which the question arises is an application by the defendants, now appellants, SMI and Mr Anil V Salgaocar, to set aside an order made on 11 March 2010 giving Golden Ocean permission to issue a claim for service and to serve it on the defendants in Goa.

Question

The relevant question before the court was as to the law applicable to the contract of guarantee.

Holding

Law applicable to the Guarantee

The charterparty is expressly subject to English law. The guarantee is contained within the charterparty.

Like the judge, and as was I think common ground before us, I consider that the proper law of the guarantee is English law. That is achieved by application of article 3. The parties' choice of English law is demonstrated with reasonable certainty by their effecting the guarantee by including within the charterparty the words “Trustworth … fully guaranteed by [SMI]”. It would, as the judge observed, be incongruous if some law other than that which governs the charterparty were to be regarded as applicable to the guarantee. In rather similar circumstances Hamblen J decided in Stellar Shipping Co v Hudson Shipping Lines [2010] EWHC 2985 (Comm) that a guarantor was also bound by the arbitration clause in the charterparty. That was, if anything, a less obvious case than is the present in which to reach that conclusion since the guarantor, Stellar, by the terms of the contract of affreightment undertook to provide a (separate) letter of guarantee. The judge, in reliance upon the now well-known observations of Lord Hoffmann in Fiona Trust and Holding Corpn v Privalov [2007] Bus LR 1719 , para 13 concluded that given the close connection between the contract of affreightment and the guarantee, and between the parties involved, one would expect them as rational businessmen to agree a common method of dispute resolution. That reasoning applies a fortiori here where it was not envisaged that the guarantee would be contained in a separate instrument. The arbitration clause called for arbitration in London. That is an additional reason for thinking that the parties here demonstrated with reasonable certainty their choice of English law as the law governing the guarantee.

Law applicable to the breach of warranty claim

What then of the law governing the claims for breach of warranty of authority? The claim is brought on a unilateral contract. The agent offers to warrant his authority from his principal in exchange for the third party entering into a contract with his principal: see Bowstead & Reynolds on Agency, 19th ed (2010), para 9-062. It is normally an implied contract which arises where a person, who I will for simplicity call the agent, by words or conduct represents that he has actual authority to act on behalf of another and a third party is induced by such representation to act in a manner in which he would not have acted if that representation had not been made. In such circumstances the agent is deemed to warrant that the representation is true and is liable for any loss caused to the third party by a breach of that implied warranty.

It seems to me that any conclusion that an implied contract of this sort is not governed by the same law as the proposed or putative contract to which it is ancillary is...