Sending notice of arbitration by email to a junior employee is not good service

United KingdomScotland

In the Commercial Court Popplewell J recently considered an application to set aside a final arbitration award of a sole arbitrator under section 72 of the Arbitration Act 1996. The Applicant did not take part in the arbitration until they received the Award by post, ordered to pay USD 43,176.27. As the notice of arbitration had only been sent to the email address of an employee, the Applicant argued this is not good service and the Award should be set aside.

Even though the Arbitration Act allows for the service by ‘any effective means’, the effectiveness of sending an email to a personal business email address (contrary to a generic business email address) will depend upon the particular role of the individual within that organisation. Popplewell J decided that, as companies can only act by natural persons, the application of agency principles will determine whether that individual’s role within the company is sufficient for service on them to amount to service on the company. However, the fact that an employee has a wide authority to act on behalf of the company, does not generally include an authority to accept service of a notice of arbitration.

Glencore Agriculture BV (formerly Glencore Grain BV) v Conqueror Holdings Ltd [2017] EWHC 2893 (Comm)

Background

The underlying dispute arose out of a voyage charterparty to carry corn in bulk from Ilychevsk (Ukraine) to Damietta (Egypt). Delays at the load port caused the Defendant to commence arbitration in line with the arbitration clause in the charterparty, which provided for arbitration in London in accordance with the LMAA terms 1997. The delays were a direct result of instructions by the Applicant, which were sent from the personal business email address of Mr Oosterman, stating that the vessel should not berth until further instructions.

All Defendant’s correspondence (pre-arbitration and during the arbitration) was then sent to Mr Oosterman’s email address, including the notice of arbitration. Similarly, the arbitrator’s correspondence was sent to Mr Oosterman’s email address. There was no response (apart from one out of office notification) to any of the correspondence, while Mr Oosterman was fully employed by the Applicant during this period. After scrutiny of Mr Oosterman’s role in the company, it was characterised as a relatively junior employee and as operational at a relatively low level in the managerial structure.

The main issue to be determined by Popplewell J, was whether Mr Oosterman had actual or ostensible authority to receive a notice of arbitration on behalf of his employer.

Application of agency principles

Popplewell J referred to section 76(3) of the Arbitration Act 1996, which provides that “a notice or other document may be served on a person by any effective means.” Popplewell J also referred to the observations of Christopher Clarke J in Bernuth Lines Ltd v High Seas Shipping Ltd (The Eastern Navigator) [2005] EWHC 3020 (Comm) [paragraph 28] and agreed that:

“There is no reason why (…) delivery of a document by e-mail – a method habitually used by businessmen lawyers and civil servants – should be regarded as essentially different from communication by post, fax or telex.”

Having concluded that use of email may be regarded as an effective means of serving a notice or other document, Popplewell J considered that the effectiveness of an email sent to a personal business email address (contrary to a generic business email address) will depend upon the particular role of the individual within that organisation. Since companies can only act by natural persons, the question whether a company is bound by notification to an employee should depend:

a) upon the authority which the company has granted to that employee to receive the notification (actual authority, express or implied), or
b) upon whether the company is estopped from denying authority because of what the company has represented to the third party about the employee’s authority to receive the notification (ostensible authority).

Additionally, Popplewell J referred to Eder J in Sino Channel Asia Ltd v Dana Shipping and Trading PTE Singapore and Another [2017] EWCA Civ 1703 [paragraph 27] and stated that:

“Even where an employee or agent has a wide general authority to act on behalf of his employer/principal, such authority does not (without more) generally include an authority to accept service of a notice of arbitration.”

Popplewell J considered that “there will ordinarily be at least one employee of the company itself who carries such authority, and if their responsibility encompasses dispute handling and resolution, authority to accept service will ordinarily be implied, at least if they are of sufficient seniority.”

In this respect Popplewell J rejected the Defendant’s submission that service was sufficient in this case merely because it was sent to a personal email address at the Applicant’s office of someone who had had some involvement in the underlying events. The Defendant had argued that it was impossible for the Defendant to retrieve the email address for the Applicant’s legal department, because it was not on their website. According to Popplewell J, the Defendant could have asked through the broking channel to whom the notice should be addressed, or could have inquired at the email address given on the Applicant’s website. Moreover, there is always the option to effect service by post to a registered or principal office, as section 76(4) of the Arbitration Act provides for.

Regarding actual and ostensible authority Popplewell J considered that, although these are conceptually very different, there are cases (like the current one) in which what is relied on are the same essential facts and in which actual and ostensible authority therefore coincide. Popplewell J decided that Mr Oosterman’s involvement consisted of sending a total of three emails in relation to loading at Ilychevsk, This is insufficient to establish implied authority, because :

“[T]hey do not hold Mr Oosterman out as having anything more than a limited operational role in relation to the voyage. They do not hold him out as having authority to handle any legal dispute arising out of the voyage, still less to accept service of legal or arbitral process and deal with it.”

This meant that the notice of arbitration and other documents were not served effectively, which saw the Applicant succeed in its challenge of the Award.

Comment

This decision shows it is crucial for anyone who wishes to serve a notice of arbitration on a company by email, that they check whether the individual has actual or ostensible authority to accept service.

As explained in the judgment, employees with responsibility for dispute handling and resolution will ordinarily carry authority to accept service of a notice of arbitration, at least if they are of sufficient seniority. However, the best approach is to ask the company directly who has authority to accept notice by email and, in the event of no or an unhelpful response, arrange for the notice to be delivered to a person in authority at its principal place of business.